S&P 500 sets record high on relief over U.S. fiscal deal

NEW YORK Thu Oct 17, 2013 5:12pm EDT

1 of 3. Traders work on the floor of the New York Stock Exchange, October 17, 2013.

Credit: Reuters/Brendan McDermid

NEW YORK (Reuters) - The S&P 500 closed at a record high on Thursday as investor confidence grew following a last-minute deal to avoid a U.S. default, but weaker-than-expected results from heavyweights IBM and Goldman Sachs pressured the Dow.

The S&P 500's intraday record of 1732.92 broke the all-time high set September 19. Over 80 percent of stocks traded on the New York Stock Exchange rose. Technology was the only S&P sector to show a loss as IBM led the decline.

IBM (IBM.N) shares hit a two-year low a day after reporting weaker-than-expected revenue and subtracted 76 points from the Dow industrial average. IBM also was the biggest decliner on the S&P 500, ending down 6.4 percent at $174.78.

Earnings released after the market's close by Google (GOOG.O) boosted shares of the world's No. 1 Web search engine 6.9 percent to $950.94 in extended-hours trading. Google said consolidated revenue increased 12 percent to $14.89 billion even as losses deepened at its Motorola mobile phone business. <ID: nL1N0162E7>

Congress approved an 11th-hour deal on Wednesday to end a partial government shutdown and increase U.S. borrowing authority, pulling the United States back from a possible default on its debt.

The political wrangling has led some investors to believe the U.S. Federal Reserve will have no choice but to leave its fiscal stimulus measures in place for several more months. That could keep stocks rising through the rest of the year.

"The scare that was created by the lengthy delay in resolving the (fiscal) issue has created a situation that has taken Fed tapering off the table for a considerable period here," said Stephen Massocca, managing director at Wedbush Equity Management in San Francisco.

"That is why we saw buying over the last week and that is why we will see continued buying for a few more days."

The CBOE Volatility Index .VIX, a measure of investor anxiety, fell to 13.43, the lowest since September 20, the week before the government shutdown began.

Investors had worried that an extended shutdown would weigh on economic growth and corporate outlooks. A Reuters survey showed economists have grown less optimistic about prospects for the economy as the fight over fiscal policy took its toll.

The Dow Jones industrial average .DJI was down 3.98 points, or 0.03 percent, at 15,369.85. The Standard & Poor's 500 Index .SPX rose 11.36 points, or 0.66 percent, at 1,732.90. The Nasdaq Composite Index .IXIC was up 23.72 points, or 0.62 percent, at 3,863.15.

Trading volume was relatively light at 5.3 billion total shares.

Goldman Sachs (GS.N) shares fell 2.4 percent to $158.32 after the fifth-largest U.S. bank by assets said third-quarter revenue plunged 20 percent, hurt by weak mortgage and bond-trading results.

So far, 54.4 percent of companies in the S&P 500 have beaten Wall Street revenue estimates, down from the 61 percent average since 2002 but above the 49 percent average for the past four quarters.

EBay Inc (EBAY.O) dropped 3.9 percent to $51.38 and was the biggest drag on the Nasdaq 100 index .NDX after the company gave a disappointing holiday forecast a day earlier, saying the U.S. economy had deteriorated partly because of the government shutdown.

Among gainers, shares of Verizon Communications Inc (VZ.N), the largest U.S. mobile operator, rose 3.5 percent to $48.90 after the company posted stronger-than-expected third-quarter earnings and revenue.

Chipotle Mexican Grill (CMG.N) reported a 15 percent jump in quarterly profit after the closing bell. Chipotle shares were up 7.1 percent to $470.00 in extended-hours trading.

The number of Americans filing new claims for unemployment benefits dropped from a six-month high last week but remained elevated as California continued to deal with a backlog related to computer problems.

The pace of manufacturing growth in the U.S. mid-Atlantic region slowed slightly in October, but firms' optimism about the future hit a 10-year high, the Philadelphia Federal Reserve Bank said.

(Reporting by Julia Edwards; Editing by Nick Zieminski and Kenneth Barry)