NEW YORK The stock market closed sharply higher as Washington moved closer to avoiding a default on the U.S. government’s debt.
The market had its best day since Jan. 2.
The Standard & Poor’s 500 index rose 36 points to close at 1,692 Thursday. The Dow Jones industrial average jumped 323 points to end at 15,126. The Nasdaq composite rose 82 points to 3,760.
House Republicans said they would advance legislation to temporarily extend the government’s borrowing authority so it can continue to pay its bills on time. The prospect of an unprecedented default on the U.S. government’s debt and a partial shutdown of the government have been dragging the stock market lower for three weeks.
“Congressmen and women are coming to terms with how calamitous it would be if the debt ceiling was not raised,” said Joseph Tanious, Global Market Strategist for J.P. Morgan Asset Management. “Cooler heads are prevailing.”
Banks and industrial stocks rose the most.
A short-term extension of the debt limit is “the right approach,” said Jack Ablin, who manages $66 billion as chief investment officer at BMO Private Bank. “It allows politicians to turn down the heat a bit while still keeping the broader issues on the front burner,” Ablin said.
In another bullish signal, small-company stocks rose even more than the rest of the market. Those stocks tend to be riskier than large, well-established companies but can also offer investors greater rewards. A sharp increase in small-company stocks means investors are more comfortable taking on risk. The Russell 2000 index jumped 15 points, or 1.4 percent, to 1,058. The Russell is just 20 points below an all-time high it reached Oct. 1.
There were hopeful signs in the market for short-term U.S. government debt. The yield on the one-month Treasury bill eased to 0.25 percent from 0.27 late Wednesday.
The yield had spiked from near zero at the beginning of the month to as high as 0.35 percent Tuesday as investors dumped the bills out of concern that the government might not be able to pay them back when they’re due. Investors demand higher yields when they perceive debt as being risky.
On major investor made a move to cut its exposure to short-term U.S. government debt. Fidelity Investments, the nation’s largest money market fund manager, said Wednesday it had sold all its short-term U.S. government debt.
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