Wall Street rises on hopes for a budget deal

NEW YORK Mon Oct 14, 2013 4:22pm EDT

1 of 3. A trader looks up at a screen on the floor of the New York Stock Exchange at the market open in New York, October 14, 2013.

Credit: Reuters/Carlo Allegri

NEW YORK (Reuters) - U.S. stocks ended a volatile session with modest gains on Monday, as investors bet that there would soon be a deal in Washington to increase the debt limit, though there were no obvious signs of progress.

President Barack Obama was scheduled to meet with several congressional leaders, and while the White House said the meeting had been delayed, signs of negotiations were taken as a positive by the market.

Senate Majority Leader Harry Reid and Senate Republican leader Mitch McConnell, who began talks on Saturday, appeared together on the Senate floor and expressed optimism a deal could be made final within days.

Stocks had dipped after weekend talks failed to reach a solution that would reopen the federal government and raise the $16.7 trillion federal borrowing limit by October 17. Failure to raise the debt ceiling could leave the world's biggest economy unable to pay its bills in the coming weeks.

"Bringing everyone together was enough to get us to come back after opening quite a bit lower, but we're still very much under the assumption that we're at an impasse," said Ralph Bassett, deputy head of North American equities at Aberdeen Asset Management in Philadelphia.

"We expect there will be an agreement in the next day or so, but there's a lot of fear."

In addition to the debt ceiling, the government shutdown, entering its third week, was seen as a drag on the economy by shaving a small percentage off the GDP with each passing day.

In a sign of the market's caution, the CBOE Volatility index .VIX, which typically trades inversely to the S&P 500, rose 1.8 percent. Trading volume was low, although that was partially related to the Columbus Day holiday, with banks and the U.S. bond market closed.

About 4.77 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, below the daily average so far this year of more than 6 billion shares.

The Dow Jones industrial average .DJI was up 64.15 points, or 0.42 percent, at 15,301.26. The Standard & Poor's 500 Index .SPX was up 6.94 points, or 0.41 percent, at 1,710.14. The Nasdaq Composite Index .IXIC was up 23.40 points, or 0.62 percent, at 3,815.28.

The day's gains were broad, with eight of the S&P's 10 sectors higher. The two decliners were sectors considered defensive: telecom and utilities. About 55 percent of stocks traded on the New York Stock Exchange closed higher while 59 percent of Nasdaq-listed shares closed up.

Investors are also looking ahead to corporate earnings this week, with results from Citigroup Inc (C.N), Coca-Cola Co (KO.N), Johnson & Johnson (JNJ.N), and Intel Corp (INTC.O) on tap. Market participants are looking to see what kind of impact the issues in Washington have had on results and forecasts.

With 6 percent of S&P 500 companies having reported, 55 percent have topped profit expectations, below the historical average.

"Earnings have been mixed at best, with revenue growth especially tepid," said Bassett, who helps oversee $312 billion in assets. "By and large, we're focused on companies where earnings growth isn't dependent on GDP being at a certain rate."

Shares of Netflix Inc (NFLX.O) rose 7.8 percent to $324.36, as the S&P's top gainer, after the Wall Street Journal reported that the company is in talks with several U.S. cable television companies, to make its streaming video service available through their set-top boxes.

On the downside, Expedia Inc (EXPE.O) plunged 6.2 percent to $48.51 after Deutsche Bank downgraded it to "hold" from "buy."

Appliance maker Whirlpool (WHR.N) fell 6.5 percent to $131.29. A note from Cleveland Research pointed to softening demand for appliances.

(Editing by Kenneth Barry and Nick Zieminski)

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Comments (13)
foiegras wrote:
All this hullabaloo about defaulting on the debt, just more socialist propaganda. Debt is bad. The American people know that, just like they know that global warming doesn’t exist (more socialist propaganda), and that it’s up to God to resolve this debt crisis, not the House of Representatives. Everything will work out for the best in the end, God willing. And did I mention that this whole thing is President Obama’s fault?

Oct 14, 2013 9:23am EDT  --  Report as abuse
There is absolutely no reason for a default if congress and the pres fail to come to agreement. The Treasury can prioritize – there’s more than enough money in the bank.

The Banksters and Dems need to stop crying wolf.

Oct 14, 2013 9:29am EDT  --  Report as abuse
TeaPublican wrote:
Oh Please!!!! Let’s just talk the truth here folks! We Americans aren’t the ones that are really going to lose if America defaults on its debt! If America defaults, the only ones that are really hurt are CHINA and JAPAN! They are the two largest U.S. creditors, holding nearly $2.5 trillion in U.S. Treasury bonds between them. Now honestly folks, do you really thing we TeaPublicans, along with the rest of our America, really care if China and Japan gets caught holding the bag! Bahahaha! Serves them right! Go ahead, ask around as I did this past week….nobody gives a crap about those countries! Yes, I know, when we TeaPublicans force obama’s government to default on its debt, there are a few of you that might lose a little bit of your 401k retirement. But come on…all of you that is just a small price some Americans are going to have to pay to save and take back OUR America! Yes, I have told you over and over and I am RIGHT, we TeaPbulicans are taking back our America in 2014 and 2016! “P n P” in 2016! Perry n Palin….yes folks, it IS going to happen!

Oct 14, 2013 9:48am EDT  --  Report as abuse
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