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Associated Press
Traders on the floor at the New York Stock Exchange spring into action Wednesday as stocks surge with the news that Senate leaders reached a deal to raise the debt limit, avoid a U.S. default and reopen the government.

U.S. debt deal sends stocks surging

– Wall Street finally got the deal it’s been waiting for.

A last-minute agreement to keep the U.S. from defaulting on its debt and reopen the government sent the stock market soaring Wednesday, pushing the Standard & Poor’s 500 index close to a record high.

Earlier Wednesday, Senate leaders agreed to fund the government through Jan. 15 and extend government borrowing through Feb. 7.

The Senate deal to raise the $16.7 trillion debt limit was reached just hours before today’s deadline, which had been set by Treasury Secretary Jacob Lew.

The government has been partially shut for 16 days because House Republicans had demanded changes to President Barack Obama’s health care law before passing a budget.

The agreement follows a month of political gridlock that threatened to make America a deadbeat and derail global financial markets.

Investors have stayed largely calm throughout the drama in Washington, with the S&P 500 actually gaining 2.4 percent since the shutdown began Oct. 1.

Wall Street had bet that politicians wouldn’t let the U.S. default, a calamity economists said could paralyze lending and push the economy into another recession.

“We knew it was going to be dramatic, but the consequences of a U.S. default are just so severe that the base case was always that a compromise was going to be reached,” said Tom Franks, a managing director at TIAA-CREF, a large retirement funds manager.

The Senate deal means that investors will be able to turn their focus back to the traditional drivers of the market. Corporations have begun to report third-quarter earnings, but Wall Street has been glued to the budget brinksmanship.

Wall Street has some catching up to do before it can make an up-to-date assessment of the economy. The shutdown kept government agencies from releasing key reports on trends such as hiring.

In general, though, the economy has been expanding this year.

Overall earnings at companies in the S&P 500 is forecast to grow 3.1 percent from a year earlier, according to data from S&P Capital IQ. That’s slower than the growth of 4.9 percent in the second quarter and 5.2 percent in the first quarter.