NEW YORK (TheStreet) -- U.S. stocks surged Wednesday as a bipartisan deal by Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell to raise the nation's borrowing limit and reopen government operations received cheers from the White House and Democratic and Republican House leadership.
The S&P 500 rose 1.4% to close at 1,721.54, all but ignoring Fitch Ratings decision to place the U.S. 'AAA' credit on rating watch negative. The Dow Jones Industrial Average jumped 1.4% to 15,373.83 while the Nasdaq advanced 1.2% to 3,839.43.
"There's obviously this palpable sense of relief," said Russ Koesterich, chief investment strategist at BlackRock in a phone interview. "Arguably, [Congress] did a little damage: fourth quarter is going to be a bit slower, you may have undermined consumer confidence more than the market is appreciating."
Congress is expected to pass a short-term resolution to assure that government remains open through January 15, and that the debt-ceiling is sufficiently increased to satisfy creditors through February 7, 2014. Reid said Congress needs to address the cost that the government shutdown and uncertainties about a default may have had on the U.S. economy.
"We have sent a message to Americans from every state and citizens of every country that the United States lives up to its obligations," Reid said. "Now Congress must return to its most important job - fostering economic growth and protecting middle-class families."
House Speaker John Boehner in a statement said his caucus would not block the bipartisan agreement reached in the Senate, and White House Press Secretary Jay Carney said President Obama applauded the deal.
In company news, the prospects of a deal helped push Bank of America (BAC) shares up more than 2% after the bank reported it earned $2.5 billion or 20 cents a share in the third quarter, an increase from earnings of $340 million or flat results per share the same time a year ago.
PepsiCo (PEP) rose more than 2% after the snack and beverages giant reaffirmed its 2013 high single digit earnings per share growth guidance of 7% after posting third-quarter earnings of $1.24 a share on revenue of $16.91 billion, versus the Wall Street target of $1.17 a share on sales of $17.02 billion. The company recorded an organic revenue decline of 1.5% at its Americas Beverages unit during the quarter but experienced an organic revenue increase of 7% at it Americas Foods business.
Abbott Laboratories (ABT) was one of the biggest gainers in the S&P 500, surging more than 6% after the global healthcare company hiked its quarterly dividend by 57% to 22 cents a share and confirmed its 2013 earnings-per-share guidance range of $1.98 to $2.04, reflecting double-digit growth.
This, as Abbott beat third-quarter earnings estimates by four cents at 55 cents a share as the company reported continued improvements in its nutrition and diagnostics testing business.
Pioneer Natural Resources (PXD) meanwhile surged about 6% as Wall Street analysts generally predicted a strong catalyst for shares of the oil and gas production company as it seeks to further unlock value at the massive Spraberry Wolfcamp shale field near Midland, Texas.
Homebuilder confidence in the market for newly built, single-family homes fell two points in October to a level of 55 from a downwardly revised reading of 57 in the previous month due to ongoing challenges relating to the cost and availability of labor and lots and uncertainty in Washington whereby the government shutdown has jammed up the approval pipeline for government backed mortgage loans, the National Association of Home Builders/Wells Fargo Housing Market Index showed Wednesday. Economists were expecting a level of 58.
The Federal Reserve's Beige Book report on Wednesday said it saw "modest to moderate" growth amid Congress' inability to fund the government.
The benchmark 10-year Treasury was jumping 17/32, diluting the yield to 2.673%.
-- Written by Andrea Tse and Joe Deaux in New York
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