NEW YORK The Standard & Poor's 500 stock index closed at a record high, sustaining the momentum it gained yesterday after lawmakers moved to end a fiscal standoff.
It's a change of pace for Wall Street, which had been completely absorbed in Washington's political drama over the last month. Now that the U.S. has avoided the possibility of default, at least for a few months, traders are returning to a state of normalcy.
"I don't think we can completely close the door on the debt ceiling chapter just yet, but we can get back to the stuff that really matters," said Jonathan Corpina, who manages trading on the floor of the New York Stock Exchange for Meridian Equity Partners.
The S&P 500 rose 11 points, or 0.7 percent, to end the day at 1,733, topping its previous high of 1,726 on Sept. 18. The Nasdaq composite added 24 points to 3,863, while the the Dow Jones industrial average dropped 2 points to 15,372.
The Dow was dragged lower by shares of IBM. The technology giant said Wednesday that its third-quarter net income rose 6 percent, but revenue fell and missed Wall Street's forecast by more than $1 billion. IBM fell $12.10, or 7 percent, to $174.50 Goldman Sachs also weighed down the index. The investment bank's revenue fell sharply as trading in bonds and other securities slowed. Goldman fell $4.28, or 3 percent, $157.90.
Now that there was no longer an immediate fear that the United States could default on its debt and the government was reopening, Wall Street was surveying the damage.
Market analysts expect the 16-day partial shutdown of the government caused billions of dollars of damage to the U.S. economy through furloughed government employees, delayed government contracts, and declines in tourism at national parks. Analysts at Wells Fargo said the shutdown likely cut 0.5 percentage points off of U.S. economic growth.
"The great unknown, though, is the extent of the hit to spending by both businesses and consumers," Ian Shepherdson, chief economist with Pantheon Macroeconomics, told clients in a note. "We know confidence has been hit, but we do not yet know whether this has been reflected in spending."
And there remain broader concerns the two parties won't be able to reach a longer-term budget agreement. The deal approved late Wednesday only permits the Treasury Department to borrow through Feb. 7 and fund the government through Jan. 15.
"The agreement represents another temporary fix that pushes fiscal uncertainty into the early months of next year," Wells Fargo analysts said.
Despite worries about the damage the debt ceiling and government shutdown did to the economy, there were signs that normalcy was returning to financial markets.
Stresses in the bond market were easing. The one-month Treasury bill was back to trading at a yield of 0.01 percent, about where it was a month ago, and down sharply from 0.35 percent on Tuesday.
Usually a staid, conservative security, the one-month T-bill was subjected to a wave of selling at the beginning of the month. Investors feared the T-bill would be the first piece of government debt to be affected by a U.S. default if the debt ceiling was breached and the federal government could no longer pay its obligations.
The yield on the more closely-watched 10-year Treasury note fell to 2.60 percent from 2.67 percent Wednesday.
Corporate earnings are expected to continue to dominate trading for the next couple weeks. So far, only 79 companies in the S&P 500 have reported third-quarter results, according to S&P Capital IQ. Analysts expect earnings at those companies to increase 3.3 percent over the same period a year ago.