Stocks climbed on Thursday, as lawmakers pushed closer to a temporary solution that would stop the country from crashing into their debts for the first time within less than two weeks and reverse the recent losses resulting from uncertainty and raising the prices of industries recently hit by a recession.
The Dow Jones Industrial Average bound 500 points (or 1.5 percent in the morning to 34,917 by 11:01 a.m. EDT on Thursday, which helped the index erase almost two weeks of losses, fueled by the possibility of a default of the 18th of October. The S&P 500 climbed 1.5% and the tech-based Nasdaq 1.7 percent, seeing sharp declines during the last two weeks, making the indexes two and four percent below their all-time highs of earlier in the month and 4% below all-time highs set last month, respectively.
Stocks climbed higher following Senate Minority Chairman Chuck Schumer (D-N.Y.) said that Democrats would accept an invite from Senate Minority Leader Mitch McConnell to lift the debt ceiling by $480 billion by December, allowing lawmakers to work out a longer-term solution after weeks of heated discussions.
Significant indexes surged as high as 2% following McConnell made the offer on Wednesday afternoon. This was a significant shift for the most powerful Republican, who has repeatedly rejected plans to defer the debt ceiling for a whole year.
A range of stocks across industries led Thursday’s rally in the energy sector, with Freeport-McMoRan Energy and betting firm Penn National Gaming and online retailer eBay leading growth in S&P up 7%, 6%, and 5%. 5, 6%, and percent, respectively.
On the Senate floor, Schumer stated that he hopes that the Senate will vote on the debt limit agreement as soon as Thursday. In a brief note for the morning, the expert Adam Crisafulli, founder of Vital Knowledge Media, acknowledged that the market is celebrating the agreement but warned that the uncertainty would continue to linger until lawmakers find an end-to-end solution.
Despite the agreement of Thursday, there’s no way to know what Democrats are likely to push to increase or even reduce the debt ceiling on their own. On Wednesday, McConnell doubled down on his refusal to support a long-term measure unless Democrats abandon efforts for another multi-trillion-dollar spending package. McConnell stated that the stopgap plan would give Democrats “more than adequate time to adopt a stand-alone debt limit bill” independently by a unique budgetary procedure known as reconciliation. It could avoid Republican approval by needing an overwhelming majority. But, Democrats oppose using reconciliation to deal with debt in the past, by House Speaker Nancy Pelosi (D-Calif.) insisting on a unanimity vote.
“When Trump was President, we voted for reconciliation. Trump was president in the last administration; we Democrats were in favor of lifting the debt ceiling as it’s the right decision to make,” Pelosi said after the House adopted a personal debt resolution. “I am hoping that the Republicans are going to take a similar stance responsibly.”