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Stocks Blast Higher as Debt Ceiling Solution Nears


Today's financial recap and tomorrow's financial outlook.

US equity futures were up 1% overnight on news reports that congressional leaders had come to an agreement to raise the debt ceiling and avert a default. A plan evolved throughout the day, indicating that Democrats and Republicans had found a middle ground. News reports that surfaced in the late afternoon suggested that the House had enough votes to pass a debt limit bill. In turn, the bill's passage would lead to a budget agreement that will re-open the government. The S&P 500 (INDEXSP:.INX) closed up 2.1%, the largest single-day gain of the year.
Financial, industrials, and consumer-related stocks were the best performers of the day. Telecom stocks lagged the averages after leading yesterday. Interest rates on short-term Treasury bills began to return to normal as it appeared headway was being made to prevent a US default. Rates still remain elevated versus their normal levels.
The Brazilian Central Bank became the first central bank in the world to raise its main interest rate five consecutive times. The rate was hiked 0.50% to 9.50%. The continued hikes have been put in place to combat capital outflows from the country and its currency's severe depreciation versus the dollar.

Additionally, the ECB and the People's Bank of China agreed upon a currency swap of up to 45 billion euros or 275 billion yuan. Recent increases in off-shore yuan trading and increased trade between the two countries necessitated the swap line's creation.
Gartner and IDC said yesterday that PC sales fell by 8.6% in the third quarter. Slow back-to-school sales were cited as the culprit for the weakness.

Tomorrow's Financial Outlook

Economic data releases -- including September retail sales and producer prices -- are on hold until the government reopens. The preliminary estimate of the University of Michigan's October consumer confidence index is scheduled to be reported in the late morning. Economists estimate that confidence will fall to 76.0 from 77.5 in September.
Little economic data is due out from the rest of the world. Germany will release the final estimate of its September consumer price index. Canada will release its September employment figures.
JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) will be the first financial companies to report earnings. Both are scheduled to report before tomorrow's market open.

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No positions in stocks mentioned.

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