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Stocks Extend Upward Move Amid Optimism About Debt Talks - U.S. Commentary


Stocks moved mostly higher over the course of the trading day on Friday, adding to the substantial gains posted in the previous session. The markets continued to benefit from signs that lawmakers in Washington are making progress toward resolving the latest fiscal crisis.

The major averages moved to the upside going into the close, once again ending the day near their highs. The Dow jumped 111.04 points or 0.7 percent to 15,237.11, the Nasdaq climbed 31.13 points or 0.8 percent to 3,791.87 and the S&P 500 rose 10.64 points or 0.6 percent to 1,703.20.

For the week, the major averages turned in yet another mixed performance. While the Nasdaq dipped by 0.4 percent, the Dow and the S&P 500 advanced by 1.1 percent and 0.8 percent, respectively.

The extension of yesterday's rally came as traders continued to express optimism regarding the latest developments in Washington.

A meeting between President Barack Obama and the House Republican leadership on Thursday seems to have helped change the tone of the debate, potentially breaking the deadlock.

In a statement released following the meeting, the GOP leadership described the conversation as "useful and productive" but noted that no final decisions were made.

Ahead of the meeting, House Republicans proposed temporarily raising the debt ceiling to avoid default and allow time for negotiations.

While Obama is said to be willing to accept a temporary increase in the debt limit, he continues to push for legislation that would also end the ongoing government shutdown.

According to reports, Obama told the House GOP leadership to return to their members and find out what needs to be done to reach an agreement to end the shutdown.

Today, the president met with Senate Republicans regarding the need to reopen the government and raise the debt ceiling.

On the economic front, Thomson Reuters and the University of Michigan released a report showing that U.S. consumer sentiment has continued to deteriorate in the month of October.

The report showed that the preliminary reading on the consumer sentiment index for October came in at 75.2 compared to the final September reading of 77.5. With the decrease, the consumer sentiment index fell for the third consecutive month and hit its lowest level since January.

However, Rob Carnell, chief international economist at ING, noted, "From a market perspective, this is a mildly encouraging data release, given that it could have been considerably worse."

Among individual stocks, shares of JP Morgan (JPM) closed slightly lower even after the financial giant reported adjusted third quarter earnings that exceeded analyst estimates

Sector News

Airline stocks showed a strong upward move over the course of the trading session, resulting in a 2.1 percent gain by the NYSE Arca Airline Index. The index moved higher for the third straight day, climbing back toward the six-year highs set last month.

Spirit Airlines (SAVE) helped lead the airline sector higher, surging up by 14.8 percent after reporting a 28.8 percent year-over-year jump in September passenger traffic.

Considerable strength was also visible among housing stocks, as reflected by the 1.7 percent gain posted by the Philadelphia Housing Sector Index. With the gain, the index climbed further off the one-month closing low it set on Wednesday.

Tobacco, trucking, and commercial real estate stocks also saw notable strength on the day, while most of the other major sectors showed more modest moves to the upside.

On the other hand, gold stocks came under substantial selling pressure, moving lower along with the price of the precious metal. With gold for December delivery tumbling $28.70 to $1,268.20 an ounce, the NYSE Arca Gold Bugs Index fell by 2.4 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved sharply higher following the overnight rally on Wall Street. Japan's Nikkei 225 Index surged up by 1.5 percent, while Hong Kong's Hang Seng Index jumped by 1.2 percent.

The major European markets also moved to the upside on the day. While the U.K.'s FTSE 100 Index advanced by 0.9 percent, the German DAX Index rose by 0.5 percent and the French CAC 40 Index inched up by less than a tenth of a percent.

In the bond market, treasuries pulled back near the unchanged line after failing to sustain an early upward move. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 2.682 percent after hitting a low of 2.645 percent.

Looking Ahead

Any weekend developments in Washington could have a significant impact on next week's trading, with reports suggesting that some lawmakers are hopeful of having the government reopened by Monday.

A slew of big name companies are also due to release their quarterly results next week, including Citigroup (C), Coca-Cola (KO), Johnson & Johnson (JNJ), Intel (INTC), Bank of America (BAC), American Express (AXP), Verizon (VZ), Google (GOOG), and General Electric (GE).

by RTTNews Staff Writer

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