We Can’t Stop: Dow Industrials Gain 200 Points as Debt Deal Nears

Miley Cyrus has it right–it’s our party and we can do what we want.

Kevin Mazur/Getty Images for Clear Channel

And what do we want? We want stocks to go up, up, up because a deal to raise the debt ceiling might be reached, never mind that the government shutdown looks set to drag on.

The Dow Jones Industrials have gained 243.01 points, or 1.6%, to 15,045.61, while the S&P 500 has climbed 1.7% to 1,684.82.

JP Morgan’s David Hensley and team explain what’s going on:

There has been some progress toward raising the US debt ceiling on a short-term basis (a number of weeks) to allow the President and Congressional leaders to discuss a range of budget and policy issues. The partial shutdown might remain in effect, but the more dangerous issue of default would be averted temporarily.

Citigroup’s Robert DiClemente and team worry about the long-term damage done by the combination of big debt and bad politics:

If the current trend that points to more intense and paralyzing political debates becomes perceived by global investors and rating agencies as a "new normal" for the US, then the consequences of hitting the debt ceiling may become dire. Instead of viewing each missed or late payment as a (forgettable) extraordinary event (as in 1979), a political risk premium will likely be embedded into the funding costs of US Treasuries. Such a premium would represent a risk of nonpayment associated with a dysfunctional government. We would enter an era where the US government is willing to hold payment of financial obligations hostage to achieving political ends.

Today, however, investors are having none of it. As of 1:42 p.m., just three Dow components are in the red, and even the defense contractors are gaining, despite the fact that the government shutdown doesn’t look to be ending. Boeing (BA), for instance has gained 2.9% to $117.74, and United Technologies (UTX) has advanced 2.3% to $105.16. And if I’ve counted correctly, just 17 S&P-500 stocks are now in negative territory–led higher by companies such as Best Buy (BBY), which has gained 7.3% to $38.90 after Stifel Nicolaus said more people expecting to shop in its stores, and Invesco (IVZ), which has risen 4.9% to $33.75 after saying assets-under-management grew. Even Tower Group International (TWGP), the seriously troubled insurer, is up p 9.9% at $4.10.

Crack open the champagne–it’s a party today.