S&P 500 reaches all-time high after U.S. debt deal

10/17/2013

NEW YORK — The Standard & Poor’s 500 index reached an all-time high Thursday, a day after Washington reached a deal to avoid a U.S. default.

The S&P 500 rose 11 points, or 0.6 percent, at 1,732 with 10 minutes of trading left. It’s on course to beat its previous closing high of 1,725 reached on Sept. 18.

The market was up as investors got back to focusing on corporate earnings and economic data. American Express and Verizon rose the most in the Dow Jones industrials after reporting earnings that beat analysts’ estimates.

The Dow was flat in late trading at 15,373, held back by declines in IBM, Goldman Sachs and UnitedHealth, which issued results that disappointed investors.

The Nasdaq composite rose 22 points, or 0.6 percent, to 3,861.

The focus on earnings is a change of pace for Wall Street, which had been absorbed in Washington’s political drama over the last month. Now that the U.S. has avoided the possibility of default, at least for a few months, traders are returning to a state of normalcy.

“I don’t think we can completely close the door on the debt ceiling chapter just yet, but we can get back to the stuff that really matters,” said Jonathan Corpina, who manages trading on the floor of the New York Stock Exchange for Meridian Equity Partners.

IBM’s third-quarter revenue fell and missed Wall Street’s forecast by more than $1 billion. The stock was down $12.10, or 7 percent, to $174.50.

Goldman Sachs also weighed down the index. The investment bank’s revenue fell sharply as trading in bonds and other securities slowed. Goldman fell $3.98, or 2.5 percent, to $158.250.

Now that there was no longer an immediate fear that the United States could default on its debt and the government was reopening, Wall Street was surveying the damage.

Market analysts expect the 16-day partial shutdown of the government caused billions of dollars of damage to the U.S. economy through furloughed government employees, delayed government contracts, and declines in tourism at national parks. Analysts at Wells Fargo said the shutdown likely cut 0.5 percentage points off of U.S. economic growth.

And there remain broader concerns the two parties won’t be able to reach a longer-term budget agreement. The deal approved late Wednesday only permits the Treasury Department to borrow through Feb. 7 and fund the government through Jan. 15.

“The agreement represents another temporary fix that pushes fiscal uncertainty into the early months of next year,” Wells Fargo analysts said.

Despite worries about the damage the debt ceiling and government shutdown did to the economy, there were signs that normalcy was returning to financial markets.

Stresses in the bond market were easing. The one-month Treasury bill was back to trading at a yield of 0.01 percent, about where it was a month ago, and down sharply from 0.35 percent on Tuesday.

Usually a staid, conservative security, the one-month T-bill was subjected to a wave of selling at the beginning of the month. Investors feared the T-bill would be the first piece of government debt to be affected by a U.S. default if the debt ceiling was breached and the federal government could no longer pay its obligations.

The yield on the more closely-watched 10-year Treasury note fell to 2.60 percent from 2.67 percent Wednesday.

Corporate earnings are expected to continue to dominate trading for the next couple weeks. So far, only 79 companies in the S&P 500 have reported third-quarter results, according to S&P Capital IQ. Analysts expect earnings at those companies to increase 3.3 percent over the same period a year ago.