* Senate leaders announce agreement reached
* S&P nears all-time high as VIX plummets
* Bank of America swings to profit, Intel gives weak outlook
* Indexes up: Dow 1.4 pct; S&P 1.4 pct; Nasdaq 1.2 pct
By Ryan Vlastelica
NEW YORK, Oct 16 U.S. stocks closed more than 1
percent higher on Wednesday after Senate leaders said they had a
deal to reopen the federal government and raise the debt
ceiling, which would avoid the threat of a debt default.
U.S. Senate Majority Leader Harry Reid and Senate Republican
leader Mitch McConnell said senators had come to an agreement
that will reopen the government through Jan. 15 and raise the
debt ceiling until Feb. 7. The House of Representatives planned
to vote on the measure later in the day.
The day's gains brought the S&P 500 within a few points of
its all-time closing high of 1,725.52, set on Sept. 18. Trading
volume has been below average, however, as many investors stayed
on the sidelines until a resolution of the fiscal issues was
"It looks like we'll get through this, which brings the
market a bit of a reprieve. Not only is this a relief rally, but
we're still in an environment with a very accommodative monetary
policy, which provides a tailwind," said Judy Moses, portfolio
manager at Evercore Wealth Management in San Francisco.
Gains were broad, with all 10 S&P 500 sectors solidly
higher, led by financial stocks, which rose 2.1 percent.
Other groups tied to the pace of economic growth, including
energy, also jumped. Crude oil rose 1 percent
while gold was essentially flat.
In another sign of easing concerns, the CBOE Volatility
index sank 21 percent in its biggest daily drop since
Aug. 2011. However, the index remains up about 12 percent over
the past four weeks.
About 78 percent of stocks traded on the New York Stock
Exchange ended higher while 69 percent of Nasdaq-listed shares
The Dow Jones industrial average was up 205.82
points, or 1.36 percent, at 15,373.83. The Standard & Poor's 500
Index was up 23.48 points, or 1.38 percent, at 1,721.54.
The Nasdaq Composite Index was up 45.42 points, or 1.20
percent, at 3,839.43.
While the issues in Washington continued to be the market's
primary driver, analysts said the focus would likely turn to the
third-quarter earnings season.
"In general, revenue growth has been challenged, and
especially in technology shares there's been low revenue
growth," said Moses, who helps oversee $4.7 billion in assets.
With 11 percent of S&P 500 companies having reported, about
57 percent have topped profit expectations, below the historical
average of 63 percent. The number of companies topping revenue
forecasts has also been below the historical average.
Investors will be closely watching for any sign that the
government shutdown and debt ceiling impasse had a negative
impact on results or forecasts. David Joy, who oversees about
$703 billion in assets as chief market strategist at Ameriprise
Financial in Boston, said he expected political uncertainty to
erode earnings expectations.
"To me the market has yet to reflect the reality of the
economic damage and the psychological damage this has done," Joy
said. "I think it's awfully aggressive to think fourth-quarter
earnings are going to be up 9 percent, given the shutdown ... my
instinct is to sell into this rally."
In its Beige Book report, the Federal Reserve said that U.S.
growth continued to chug along at a "modest to moderate pace" in
September and early October, providing the fullest update on the
economy since a government shutdown halted publication of most
Intel Corp late Tuesday gave a revenue outlook that
missed expectations and warned that production of its upcoming
Broadwell processors was delayed. However, shares of the Dow
component rose 1.3 percent to $23.69 as the stock participated
in the broad market rally.
Bank of America Corp swung to a third-quarter profit
as provisions for credit losses fell. Shares rose 2.2 percent to
Shares of Yahoo fell 0.9 percent to $33.09 a day
after the company took down its own forecast for the full 2013
year, trimming the midpoint of its net revenue guidance from
$4.5 billion to $4.425 billion.
J.P. Morgan Chase & Co will pay $100 million to
settle charges for the "London Whale" trading scandal, the
Commodity Futures Trading Commission said on Wednesday. Shares
of the Dow component rose 3.2 percent to $54.