Stocks rally on hopes Congress will avert government shutdown, Dow rises 300 points

Stocks jumped on Thursday, continuing Wednesday’s midday comeback, as Congress appeared to near a deal that would raise the debt limit in the short term and avoid a disastrous government default.

The Dow Jones Industrial Average rose 350 points, or 1%, helped by gains in Visa, Nike and Home Depot. The S&P 500 rallied 1.15% and the Nasdaq Composite jumped 1.2%. Thursday’s gains put the major averages in the green for the week.

Stocks rose broadly on Thursday with technology shares and reopening plays trading higher. Twitter rose 2.6%, Nvidia popped 1.7% and AMD rose 1.6%. Facebook gained after JPMorgan said it was time to buy the recent dip on the stock.

Meanwhile, General Motors rose 1%. Costco shares added 2% after reporting better-than-expected September sales.

Washington’s race to reach an agreement on the debt ceiling has been an overhang for the market this week as investors hoped to avoid a government default. Stocks reversed their downward course on Wednesday when Senate Minority Leader Mitch McConnell offered a short-term suspension proposal to Senate Democrats. They were likely to accept the deal that would raise the debt ceiling by a specific amount and allow the government to keep operating until some point in December.

“A temporary deal should help reduce debt ceiling related market volatility over the next few weeks as attention shifts towards December,” wrote Mark Haefele, chief investment officer of global wealth management at UBS.

Following the news on Wednesday, the Dow reversed and ended more than 100 points higher. The S&P advanced 0.4%, after falling as much as 1.27%. The Nasdaq Composite rose 0.5%, after dropping as much as 1.2%.

“While we believe a debt ceiling deal will get done, politicians may need some market ‘motivation.’ This could keep near-term volatility elevated,” said Christopher Harvey, senior equity analyst at Wells Fargo Securities. “We view yesterday’s offer from Senate GOP leadership not as a durable solution, but rather as an invitation to stave off a potentially immediate disaster — a small positive.”

Weekly jobless claims fell sharply last week as the enhanced unemployment benefits ended, the Labor Department reported Thursday. Initial filings for unemployment benefits totaled 326,000 for the week ended Oct. 2, below the 345,000 Dow Jones estimate and a drop from the previous week’s 364,000.

October has been an especially volatile month, driven by uncertainty about U.S. fiscal and monetary policy and supply chain constraints, although economic data suggests the economy has already started to climb out of the delta-driven summer slump, according to Goldman Sachs’ Chris Hussey. Markets may also be treading lightly heading into the third quarter earnings season, which begins next week, he added.

After Wednesday’s reversal, the S&P 500 and the Dow are now in the green slightly for the week. The Nasdaq Composite is still off by 0.4%.