* Senate leaders announce agreement reached
* S&P nears all-time high as VIX plummets
* Bank of America swings to profit, Intel gives weak outlook
* Indexes up: Dow 1.1 pct; S&P 1.2 pct; Nasdaq 1.1 pct
By Ryan Vlastelica
NEW YORK, Oct 16 U.S. stocks surged more than 1
percent on Wednesday after Senate leaders said they had a deal
to reopen the federal government and raise the debt ceiling to
avoid a U.S. debt default.
U.S. Senate Majority Leader Harry Reid and Senate Republican
leader Mitch McConnell said senators had come to an agreement
that will reopen the government through Jan. 15 and raise the
debt ceiling until Feb. 7. The House of Representatives planned
to vote on the measure later in the day.
The gains brought the S&P 500 index within striking distance
of the record intraday high of 1729.86 set on Sept. 19. Trading
volume was low, however, as many investors stayed on the
sidelines until a resolution of the fiscal issues was official.
"It looks like we'll get through this, which brings the
market a bit of a reprieve. Not only is this a relief rally, but
we're still in an environment with a very accommodative monetary
policy, which provides a tailwind," said Judy Moses, portfolio
manager at Evercore Wealth Management in San Francisco.
Gains were broad, with all 10 S&P 500 sectors solidly
higher, led by financial stocks, which rose 2 percent.
Other groups tied to the pace of economic growth, including
energy, also outperformed on the day.
In another sign of easing concerns, the CBOE Volatility
index sank 19.4 percent in its biggest daily drop this
year. However, the index remains up about 15 percent over the
past four weeks.
The Dow Jones industrial average was up 168.75
points, or 1.11 percent, at 15,336.76. The Standard & Poor's 500
Index was up 19.72 points, or 1.16 percent, at 1,717.78.
The Nasdaq Composite Index was up 41.89 points, or 1.10
percent, at 3,835.90.
While the issues in Washington continued to be the market's
primary driver, analysts said the focus would likely turn to the
third-quarter earnings season.
"In general, revenue growth has been challenged, and
especially in technology shares there's been low revenue
growth," said Moses, who helps oversee $4.7 billion in assets.
With 11 percent of S&P 500 companies having reported, about
57 percent have topped profit expectations, a rate that is below
the historical average of 63 percent. The number of companies
topping revenue forecasts has also been below the historical
Investors will be closely watching for any sign that the
government shutdown and debt ceiling impasse had a negative
impact on results or outlooks. David Joy, who oversees about
$703 billion in assets as chief market strategist at Ameriprise
Financial in Boston, said he expected the political uncertainty
to erode earnings expectations going forward.
"To me the market has yet to reflect the reality of the
economic damage and the psychological damage this has done," Joy
said. "I think it's awfully aggressive to think fourth-quarter
earnings are going to be up 9 percent, given the shutdown... my
instinct is to sell into this rally."
Intel Corp late Tuesday gave a revenue outlook that
missed expectations and warned that production of its upcoming
Broadwell processors was delayed. However, shares of the Dow
component rose 0.9 percent to $23.60 as the stock participated
in the broad market rally.
Bank of America Corp swung to a third-quarter profit
as provisions for credit losses fell. Shares rose 2.1 percent to
Shares of Yahoo fell 0.7 percent to $33.15 a day
after the company took down its own forecast for the full 2013
year, trimming the midpoint of its net revenue guidance from
$4.5 billion to $4.425 billion.
J.P. Morgan Chase & Co will pay $100 million to
settle charges for the "London Whale" trading scandal, the
Commodity Futures Trading Commission said on Wednesday. Shares
of the Dow component rose 3 percent to $53.88.