By Damien J Trois and Alex Veiga
Stocks are closing higher on Wall Street on Thursday as investors welcomed progress in Congress’s impasse on raising the federal debt limit. A temporary extension would give lawmakers more time to reach a permanent solution. The S&P 500 rose 0.8% and the Nasdaq Composite gained 1.1%. Pfizer got a 1.7% increase after asking the US government to allow the use of its COVID-19 vaccine in children ages 5 to 11. The number of Americans applying for unemployment benefits fell last week as the job market continued to improve. The Labor Department will release a more detailed employment report for September on Friday.
(asterisk)(asterisk) this is a breaking news update(asterisk)(asterisk) AP’s back story appears below.
Technology companies helped lift shares on Wall Street broadly on Thursday as investors welcomed the end of the impasse in Congress over raising the federal debt limit.
The S&P 500 was up 1% as of 3:01 p.m. Eastern. Nearly 78 per cent of the benchmark index’s stocks rose. The Dow Jones Industrial Average rose 367 points, or 1.1%, to 34,783 and the tech-heavy Nasdaq climbed 1.3%.
Markets in Europe and Asia were also broadly higher.
The market was already in the middle of a day of volatility when Senate GOP leader Mitch McConnell on Wednesday proposed a proposal that would allow an emergency extension of the debt limit. Senate Majority Leader Chuck Schumer said Thursday that a deal has been reached with Republicans to extend the government’s borrowing authority through December.
The loan limit is the limit on the amount the federal government can borrow and needs to be raised by October 18. Treasury Secretary Janet Yellen warned that the country would face a financial crisis and economic recession if Congress failed to do so.
Debt limit disputes and the prospect of unprecedented federal defaults are just one of many concerns weighing on the market. Those concerns sent the benchmark S&P 500 swinging between daily gains and losses of more than 1% for four days.
Investors got another encouraging news Thursday after the Labor Department reported that the number of Americans applying for unemployment benefits fell last week for the first time in four weeks. The labor market is struggling to recover from the initial impact of the pandemic 18 months ago, when the COVID-19 lockdown hit jobs.
Wall Street will get another snapshot of the job market and its recovery on Friday when the Labor Department releases its employment report for September. The job market recovery has been closely watched for any clues on how quickly the Federal Reserve will ease its unprecedented support for markets and the economy. Inflation also remains a major concern as persistently high inflation could prompt the central bank to raise interest rates sooner than expected.
Jason Pride, chief investment officer for private property at Glenmead, said Friday’s jobs report will have little impact on the Fed’s plans to reduce bond purchases and begin raising interest rates. Much of the mismatch between a slowdown in employment growth and an increase in job openings is circumstantial, such as people holding off on returning to the workforce to care for families or learning new skills to find different jobs, he said.
“I don’t think there’s anything that the Fed does with interest rates changes or bond purchases that will change people’s decisions about when they return to the workforce,” he said. “It’s time to start taking the foot off the pedal.”
Once the Fed actually starts reducing its bond purchases, Wall Street could see less volatility, as “people will get comfortable with the momentum and they will see that the market and the economy can handle it.”
Bond yields rose. The yield on the 10-year Treasury rose to 1.57% from 1.52% late Wednesday.
COVID-19 is hindering economic recovery after a surge in cases over the summer. Consumer spending and job growth had stalled and supply chain problems disrupted operations in a wide range of industries.
More positive news came from Pfizer on Thursday about fighting future spikes in the virus. It asked US regulators to allow the use of its COVID-19 vaccine in children aged 5 to 11. The drug developer’s stock rose 1.8%.