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Stocks Close Higher Following News Of Debt Limit Deal - U.S. Commentary

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Stocks moved mostly higher over the course of the trading day on Wednesday following the sell-off seen in the previous session. The tech-heavy Nasdaq fluctuated as the day progressed but managed to close moderately higher.

The major averages ended the day in positive territory but off their highs of the session. The Dow climbed 54.33 points or 0.3 percent to 21,807.64, the Nasdaq rose by 17.74 points or 0.3 percent to 6,393.31 and the S&P 500 advanced 7.69 points or 0.3 percent to 2,465.54.

The rebound on Wall Street came following news President Donald Trump agreed to support a measure that would raise the debt ceiling and fund the government for three months.

The short-term debt limit and government funding measure would be attached to a bill providing aid for victims of Hurricane Harvey.

House Minority Leader Nancy Pelosi, D-Calif., and Senate Minority Leader Chuck Schumer, D-N.Y., released a statement announcing the agreement on the combined bill after meeting with Trump.

The statement by Pelosi and Schumer came even though House Speaker Paul Ryan, R-Wis., attacked the idea of a short-term debt limit increase just hours earlier.

Speaking to reporters, Ryan described a Democratic plan to combine a Hurricane Harvey aid package with a short-term debt limit increase as "ridiculous and disgraceful" as well as "unworkable."

Trump confirmed the agreement in remarks to reporters aboard Air Force One as he traveled to North Dakota for a tax reform event.

On the U.S. economic front, the Institute for Supply Management released a report showing a rebound in the pace of growth in service sector activity in the month of August.

The ISM said its non-manufacturing index climbed to 55.3 in August after falling to 53.9 in July, with a reading above 50 indicating growth in the service sector. Economists had expected the index to rebound to 55.8.

A separate report released by the Commerce Department showed the trade deficit came in slightly wider in the month of July.

The Commerce Department said the trade deficit widened to $43.7 billion in July from a revised $43.5 billion in June. Economists had expected the deficit to widen to $44.6 billion.

Meanwhile, the Federal Reserve released its Beige Book, which said economic activity expanded at a modest to moderate pace across all twelve districts in July and August.

Sector News

Computer hardware stocks saw considerable strength on the day, resulting in a 1.8 percent jump by the NYSE Arca Computer Hardware Index. With the gain, the index reached its best closing level in a month.

Electronics for Imaging (EFII) posted a standout gain after the digital imaging company said it does not currently expect an accounting review to require a restatement of previously reported financial results.

Significant strength was also visible among energy stocks, which moved higher along with the price of crude oil. Crude for October delivery climbed $0.50 to $49.16 a barrel.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index advanced by 1.7 percent, while the NYSE Arca Oil & Gas Index and the NYSE Arca Natural Gas Index both climbed by 1.5 percent.

Railroad, retail, and airline stocks also saw notable strength on the day, while gold stocks moved lower along with the price of the precious metal.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index edged down by 0.1 percent, while Hong Kong's Hang Seng Index fell by 0.5 percent.

Meanwhile, the major European markets turned in another mixed performance on the day. While the U.K.'s FTSE 100 Index dipped by 0.3 percent, the French CAC 40 Index rose by 0.3 percent and the German DAX Index advanced by 0.8 percent.

In the bond market, treasuries gave back some ground over the course of the session after yesterday's rally. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed by 3.8 basis points to 2.108 percent.

Looking Ahead

The European Central Bank's monetary policy announcement is likely to be in focus on Thursday, although the ECB is widely expected to leave interest rates unchanged and maintain its asset purchase program.

Trading could also be impacted by reaction to a report on weekly jobless claims as well as revised data on labor productivity and costs in the second quarter.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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