New York Report: Hopes of debt deal drive rally on Wall Street

MAJOR US stock indexes posted their strongest rally in more than nine months yesterday after signs of progress in negotiations to raise the US debt limit, at least temporarily.

The market rally left the S&P 500 less than two per cent away from its record closing high set three weeks ago, with traders now focused on an earnings season that begins in earnest today with results from top banks JPMorgan and Wells Fargo.

House Republican leaders acted to break a logjam in negotiations by proposing a bill to raise the federal government’s debt limit without attachments. The move was a significant shift for Republicans, who had tried to use the must-pass legislation to extract concessions from Democrats on spending and gutting the new healthcare law known as Obamacare. Their proposal, which they planned to present to President Barack Obama at the White House, would postpone the threat of a US default from 17 October until the middle or end of November. The federal government would remain in a partial shutdown.

“What this is, is opening the door to discussion and negotiation when before we had two sides just finger pointing,” said Peter Jankovskis, co-chief investment officer at OakBrook Investments. “We don’t know if in six weeks we’ll be in the same place, but at least this opens the possibility of a lasting deal,” he said.

The Dow Jones industrial average rose 323.09 points or 2.18 per cent, to 15,126.07, the S&P 500 gained 36.16 points or 2.18 per cent, to 1,692.56 and the Nasdaq Composite added 82.971 points or 2.26 per cent, to 3,760.747.