Stocks surge as debt, energy concerns ease

U.S. equities rose on Thursday, bolstered by progress on U.S. debt-ceiling talks and easing concerns about Europe’s energy crunch.

The S&P 500 climbed as much as 1.5 percent before nearly halving gains on China’s plans to tighten its supervision over technology companies. The advance was led by the materials and consumer discretionary sectors, extending a three-day rally to 2.3 percent. The yield on the U.S. 10-year Treasury note climbed to 1.57 percent, the highest since June.

“We’ve had a 24-hour stretch where we’ve pulled back from a few of the key risk drivers that have been concerning markets,” said Giorgio Caputo, senior portfolio manager at J O Hambro Capital Management.

Markets have been buffeted in the past month by worries about an energy crisis, elevated inflation, reduced stimulus and slower growth. However, Senate leaders announced an agreement Thursday to extend the government’s borrowing authority into December. The move came a day after Senate GOP leader Mitch McConnell made an offer that paved the way for the emergency extension of the debt ceiling.

The temporary compromise between Republicans and Democrats may have also helped give investors optimism that Congress can work out compromises in other areas, said Greg Bassuk, CEO at Axs Investments.

Natural gas prices were also lower on Thursday after signals Russia may increase supplies to Europe.

“The volatility we’ve seen in the markets here this week where we’re up one day, down the next - is really a reflection of the news cycles and the different news that we’ve been receiving,” Chris Gaffney, president of world markets at TIAA Bank, said by phone.

Up next, all eyes will be on Friday’s U.S. nonfarm payrolls, which may shed light on the the Federal Reserve’s timeline to cut bond purchases. There is growing optimism the report will show the kind of “decent” jobs growth Federal Reserve Chair Jerome Powell said he wants. U.S. initial jobless claims fell more than expected last week and ADP employment figures beat expectations for September.

“Both really reflect that the job market is strengthening and that people are getting back to work,” Gaffney said of the latest employment data. “That certainly bodes well for the markets going forward in that the more people that are working, the more spending can occur as people get back to work.”

Oil reversed losses after the U.S. Energy Department said it has no plans to tap oil reserves. The dollar was little changed. Gold fell.