By Lu Wang
and Aubrey Pringle
NEW YORK: Stocks rose Friday, sending the Standard & Poor’s 500 index to the highest level since September, on speculation lawmakers were making progress toward an agreement on raising the debt limit to avoid a default.
Johnson & Johnson advanced 1.9 percent as Goldman Sachs Group Inc. boosted the stock’s rating. An index of homebuilders climbed 2 percent amid analyst upgrades. Cognizant Technology Solutions Corp. climbed 5.5 percent after Infosys Ltd. raised its revenue forecast. Gap Inc. dropped 6.7 percent as its September sales missed analysts’ estimates.
The S&P 500 increased 0.6 percent to 1,703.20, erasing losses since the government’s partial shutdown that began Oct. 1.
The Dow Jones industrial average climbed 111.04 points, or 0.7 percent, to 15,237.11, the highest level since Sept. 27.
“We are picking up smoke signals that there are constructive talks,” said Jim Russell, who helps oversee $112 billion as a senior equity strategist for US Bank Wealth Management. “It doesn’t take much imagination to see that a framework is coming together for a temporary extension of the budget ceiling, and then negotiations to reopen the government as early as next week. We do think that things are moving forward.”
The S&P 500 on Thursday jumped 2.2 percent, the most since Jan. 2, on a House Republican proposal for a short-term increase in the debt ceiling that would reduce the prospects for a U.S. default. The index gained 0.8 percent this week and is about 1.3 percent away from a record 1,725.52 reached on Sept. 18.
Without an increase to the debt limit, the U.S. will exhaust its borrowing authority on Oct. 17 and would run out of funds to pay all of its bills sometime between Oct. 22 and Oct. 31, according to the Congressional Budget Office.
Data released on Friday showed consumer sentiment in the U.S. fell in October to a nine-month low as the shutdown and the debt-ceiling debate caused outlooks to sour. The Thomson Reuters/University of Michigan preliminary consumer sentiment index slid to 75.2 this month from 77.5 in September. Economists projected a drop to 75.3, according to the median estimate in a Bloomberg survey.
Better-than-expected earnings and three rounds of monetary stimulus from the Federal Reserve have helped drive the S&P 500 up as much as 155 percent from a 12-year low. The benchmark gauge has rallied 19 percent this year as data from manufacturing to housing and the labor market improved.
With few economic reports available during the shutdown, investors are watching third-quarter corporate earnings. Profits for companies in the S&P 500 probably increased 1.4 percent during the three months while sales rose 2 percent, according to analysts’ estimates compiled by Bloomberg.
JPMorgan Chase & Co. reported its first quarterly loss under Chief Executive Officer Jamie Dimon after taking a $7.2 billion charge for legal expenses. Earnings on an adjusted basis still beat analysts’ estimates. The shares fell 1 cent to $52.51.
Wells Fargo & Co. also fell 1 cent, to $41.43. While profit rose in the third quarter, the largest U.S. home lender posted declines in revenue, the net interest margin and its backlog of new mortgage loans, and the company failed to cut costs as much as some analysts predicted.
The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options prices known as the VIX, fell 4.6 percent to 15.72. The index has slumped 23 percent over the past three days, the most since April.
All 10 main industries in the S&P 500 rose as energy, consumer-discretionary and technology companies climbed at least 0.8 percent to lead the gains. The Russell 2000 Index, a benchmark measure for smaller companies, rallied 1.4 percent to 1,084.32.