US stocks advance as default risk appears to ebb

Traders work on the floor of the New York Stock Exchange in New York City, on Oct 6, 2021. PHOTO: REUTERS

NEW YORK (AFP) - Wall Street stocks finished modestly higher on Wednesday (Oct 6) after trading in the red most of the session as congressional Republicans offered a compromise in high-stakes talks on lifting the US debt limit.

Senate Minority Leader Mitch McConnell said Republicans would allow Democrats to vote for temporarily lifting the ceiling on how much the government can borrow.

The stalemate in the talks had raised the possibility of a US default in less than two weeks. McConnell's offer punts the problem to December, giving the ruling Democrats time to prepare a longer term solution.

"For now, at least, this disaster du jour just got moved to the back-burner," said Art Hogan, chief strategist at National Securities.

The Dow Jones Industrial Average ended up 0.3 per cent at 34,416.99, more than 550 points above its session low.

The broad-based S&P 500 gained 0.4 per cent to 4,363.54, while the tech-rich Nasdaq Composite Index advanced 0.5 per cent to 14,501.91.

Hogan said the market could be in line for more volatility in the weeks ahead, with the Federal Reserve expected to taper stimulus payments soon and investors anxious about the upcoming earnings season.

Sam Stovall, chief investment officer at CFRA Research, said that "stagflation" has returned as a leading worry to investors, given rising consumer prices.

But he pointed to forecasts showing inflation retreating a year from now, saying in a note that "comparisons with the 1970s are out of line."

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