Stocks skyrocketed Thursday as investors were encouraged by talk of a deal that may avert a U.S. government default.
President Obama will meet with top House Republicans at the White House Thursday afternoon to seek a path beyond a confrontation that has left the government shuttered for close to two weeks.
House Republican leaders appear to be ready to advance a short-term debt limit increase that would prevent the first default on U.S. debt next week.
The Dow Jones industrial average was up about 300 points, or 2%, in late afternoon trading. The Standard & Poor's 500 index gained 2.1% and the Nasdaq composite index skyrocketed 2.3%.
All major U.S. averages have taken a beating this month as a partial shutdown of the U.S. government dragged on and the risk of a possible default on its debt increased.
"I think investors are facing what has become an all too familiar but nevertheless difficult task of correctly pricing in the risk of the U.S. reaching its debt ceiling," said Ric Spooner, chief of CMC Markets in Sydney.
On Thursday, Treasury Secretary Jacob Lew urged Congress to raise the government's borrowing limit before the current cap is reached on Oct. 17, warning that a Republican idea to prioritize payments with cash on hand could cause "irrevocable damage" to the U.S. economy.
On Wednesday, Fidelity Investments, the nation's largest money market fund manager, said it had sold all of its short-term U.S. government debt in an effort to limit money market investors' exposure to a potential default.
FIDELITY: Sheds government bonds
There were hopeful signs in the market for short-term U.S. government debt. The yield on the one-month Treasury bill dropped to 0.23% from 0.27% late Wednesday.
The yield had spiked from near zero at the beginning of the month to as high as 0.35% Tuesday as investors dumped the bills out of concern that the government might not be able to pay them back when they're due. Investors demand higher yields when they perceive debt as being risky.
Wall Street rose slightly on Wednesday. The Dow rose 0.2% to close at 14,803. The S&P 500 rose 0.1% at 1,656. The Nasdaq fell 0.5%, to 3,677.
WEDNESDAY: Stocks close with small gains; Nasdaq drops
In Asia Thursday, Japan's Nikkei rose 1.1% to 14,194.71. Hong Kong's Hang Seng index fell 0.4% to 22,951.30.
Benchmarks in Europe traded higher. Britain's FTSE 100 index added 1.5% and France's CAC 40 index shot 2.2% higher. German stocks also saw strong gains as the DAX index jumped 2%.
Benchmark crude for November delivery was up $1.32 to $102.93 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.88 to close at $101.61 a barrel on the Nymex on Wednesday.
Contributing: Associated Press