The broad indices all ended with solid gains, as congressional Republicans appeared more willing compromise on a deal to restore full government services and avert a default. Banks led the market, with the KBW Bank Index (I:BKX) rising 1.2% to close at 62.98, with all 24 index components ending with gains.
According to a Washington Post report, "Privately, a number of GOP lawmakers are pushing for a shift from what they view as a futile debate on health-care to exploration of a broader deal to reduce the nation's debt." The unnamed sources for the report were quoted as saying House Speaker John Boehner (R., Ohio) had vowed not to allow the U.S. to default on its debt.
U.S. Treasury Secretary Jack Lew in a letter to Boehner on Sept. 28 said the "extraordinary measures" the Treasury was taking to maintain its borrowing power will "be exhausted no later than Oct. 17," unless the $16.7 trillion federal debt limit is raised.During a press conference on Friday, Boehner continued to take a tough line, saying the budget impasse leading to the partial shutdown of the federal government on Tuesday, "isn't some damn game. But after 55 years of spending more than you bring in, something ought to be addressed. This year we'll have more revenue than any year in the history of our country and yet still have a nearly $700 billion deficit." Market optimism Friday was also fed by the filing of plans by Twitter for a $1 billion public offering, and the successful initial public offering by Potbelly (PBPB). For bank stocks investors, earnings season begins early next Friday, when Wells Fargo (WFC) and JPMorgan Chase (JPM - Get Report) announce their third-quarter results. In his third-quarter earnings preview for large-cap U.S. banks, KBW analyst Christopher Mutascio on Thursday wrote "Unfortunately, it seems to us that the fate of the bank stocks (in terms of positive catalysts) is now tied directly to the macro-economic environment. A breakout of the GDP malaise could allow for further multiple expansion and outperformance."