Signs of compromise aid stocks
NEW YORK — Signs that lawmakers are making moves to end a stalemate in Washington and avert a government debt default halted a slump on the stock market Wednesday.
President Obama is making plans to talk with Republican lawmakers at the White House in the coming days as pressure builds on both sides to resolve their deadlock over the federal debt limit and the partial government shutdown before the Treasury's borrowing authority is exhausted next week.
The stock market's losses accelerated at the start of this week as the shutdown dragged on and both the White House and House Republicans appeared to be getting more entrenched in their positions. The Standard & Poor's 500 index has fallen about 4 percent since climbing to a record on Sept. 18.
“We were quite oversold,” Alec Young, a global equity strategist at S&P Capital, said of the market's moderate recovery on Wednesday. “For this really to have any legs, though, we need to see signs of compromise in Washington.”
The S&P 500 index gained 0.95 points, or 0.1 percent, to 1,656.40. The index lost 2 percent in the first two days of this week as concerns grew that politicians would fail to reach a deal before the government hits its debt ceiling on Oct. 17.
The Dow Jones industrial average rose 26.45 points, or 0.2 percent, to 14,802.98. The Nasdaq composite fell 17.06 points, or 0.5 percent, to 3,677.78.
The pace of companies reporting third-quarter earnings is also picking up this week, giving investors better insight into how corporate America is doing.
Yum Brands was the biggest decliner in the S&P 500 index. The owner of KFC, Taco Bell and Pizza Hut reported earnings that fell short of Wall Street's expectations. The discount retailer Family Dollar slumped after giving a cautious earnings forecast for next year.
“It looks like there has been some disappointment in the early earnings already,” said Colleen Supran, a principal at San Francisco-based Bingham, Osborn & Scarborough, an investment adviser and asset management company.
Yum Brands slumped $4.82, or 6.8 percent, to $66.48. Sales in China have grown weaker and the company cut its full-year earnings forecast after the closing bell Wednesday. Family Dollar fell 74 cents, or 1.1 percent, to $68.71.
In a move that many investors regarded as a positive for stocks, the White House nominated Federal Reserve Vice Chair Janet Yellen for the top position at the central bank.
Investors expect Yellen to continue the aggressive economic stimulus policies championed by outgoing Chairman Ben Bernanke.
Yellen's appointment “does add certainty, in the absence of certainty for stocks,” said Jim Russell, a regional investment director at U.S. Bank. “It perhaps keeps a little bit of a safety net under equities for the near, or intermittent, term.”