Optimism About Debt Limit Deal Contributing To Rally On Wall Street

Stocks have moved sharply higher in morning trading on Thursday, extending the upward move seen over the course of the previous session. The major averages have all shown strong moves to the upside, with the Nasdaq and the S&P 500 climbing well off the lows set on Monday.

In recent trading, the major averages have reached new highs for the session. The Dow is up 534.94 points or 1.6 percent at 34,951.93, the Nasdaq is up 236.67 points or 1.6 percent at 14,738.58 and the S&P 500 is up 65.62 points or 1.5 percent at 4,429.17.

The rally on Wall Street comes as traders continue to react positively to news of Senate Minority Leader Mitch McConnell’s, R-Ken., offer to allow a temporary extension of the debt limit.

Senate Majority Leader Chuck Schumer, D-N.Y., said early this morning that an agreement had not yet been reached but said the two sides were “making good progress.”

“We’re not there yet, but I hope we can come to an agreement tomorrow morning,” Schumer said from the Senate floor.

The ongoing negotiations come as lawmakers are facing an October 18th deadline to raise the debt limit and avoid a potential default.

Adding to the positive sentiment, a report from the Labor Department showed a bigger than expected pullback in first-time claims for U.S. unemployment benefits in the week ended October 2nd.

The report said initial jobless claims fell to 326,000, a decrease of 38,000 from the previous week’s revised level of 364,000.

Economists had expected jobless claims to dip to 348,000 from the 362,000 originally reported for the previous week.

The bigger than expected decrease came after jobless claims rose for three straight weeks, reaching their highest level since early August.

The release of the weekly jobless claims report comes a day ahead of the release of the Labor Department’s more closely watched monthly jobs report on Friday.

Economists currently expect employment to increase by 488,000 jobs in September after rising by 235,000 jobs in August. The unemployment rate is expected to dip to 5.1 percent from 5.2 percent.

Networking stocks have shown a significant move to the upside in morning trading, resulting in a 2.3 percent jump by the NYSE Arca Networking Index.

Considerable strength has also emerged among steel stocks, with the NYSE Arca Steel Index surging up by 2.4 percent after ending the previous session at a six-month closing low.

Chemical stocks are also turning in a strong performance on the day, as reflected by the 2.1 percent gain being posted by the S&P Chemical Sector Index.

Semiconductor, biotechnology and retail stocks have also moved notably higher amid broad based strength on Wall Street.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan’s Nikkei 225 Index advanced by 0.5 percent, while Hong Kong’s Hang Seng Index spiked by 3.1 percent.

The major European markets have also moved to the upside. While the French CAC 40 Index has surged up by 1.8 percent, the German DAX Index is up by 1.6 percent and the U.K.’s FTSE 100 Index is up by 1.2 percent.

In the bond market, treasuries have come under pressure after ending the previous session nearly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 3.3 basis points at 1.557 percent.