U.S. stocks rose, leaving the Standard & Poor’s 500 Index (CME:SPZ13) less than 1% from a record, amid signs lawmakers could reach a deal before the government loses its ability to borrow money in three days.
The S&P 500 rose 0.4% to 1,710.21 at 4 p.m. in New York, reversing an earlier drop of as much as 0.7% for a fourth day of gains. The gauge is at its highest since Sept. 19 and within 16 points of its Sept. 18 record of 1,725.52.
“Investors are encouraged that the political posturing appears to be dying down and that real negotiations are under way,” Alan Gayle, senior strategist at RidgeWorth Capital Management, said by phone from Atlanta. His firm oversees about $48 billion. “The expectation is that as long as there are genuine negotiations, that there will be a reasonable solution that will avoid a default and secondly will get the government up and running again.”
The S&P 500 erased early declines after the White House said that President Barack Obama and Vice President Joe Biden would meet with congressional leaders. The meeting was later postponed after Obama said “important progress” had been made in negotiations. The delay will give both sides more time for talks, the White House said in a statement.
Senate Majority Leader Harry Reid said he’s “very optimistic” an agreement will be reached, while Minority Leader Mitch McConnell said he shares Reid’s optimism on a budget deal.
Reid told reporters at the Capitol today that he and McConnell are closer to an agreement, though they haven’t reached one yet.
The benchmark index rose 0.8% last week, reaching the highest level since September, on speculation lawmakers would reach a temporary agreement to increase the debt ceiling and avoid a default.
The government will exhaust its $16.7 trillion borrowing authority Oct. 17. Without legislative action, the U.S. would start missing payments sometime between Oct. 22 and Oct. 31, according to the Congressional Budget Office.
The government has been partially shut down since Oct. 1 after Congress failed to pass a spending authorization bill for the financial year. Some official services remain suspended and hundreds of thousands of workers are on unpaid leave.
The prospect of a U.S. default threatens the U.S. and world economies, International Monetary Fund Managing Director Christine Lagarde said.