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Stocks soar on hopes for deal to avoid US default

By Ken Sweet

Associated Press

Published: Thursday, Oct. 10 2013 10:37 a.m. MDT

A man looks at stock update outside a securities firm in Tokyo Friday, March 9, 2012.

Junji Kurokawa, Associated Press

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NEW YORK — The stock market broke out of a three-week funk Thursday as Washington moved closer to a deal to avert a U.S. government default.

The Dow Jones industrial average jumped 207 points, or 1.4 percent, to 15,004 after the first hour of trading.

The Standard & Poor's 500 index rose 24 points, or 1.4 percent, to 1,680. The Nasdaq composite index added 62 points, or 1.7 percent, to 3,740.

The market has been sliding since mid-September as Washington's gridlock got investors worried that the U.S. could default on its debt and wreak havoc on financial markets. As of Wednesday the S&P 500 index had fallen 4 percent since reaching an all-time high of 1,725 on Sept. 18.

President Barack Obama will meet with top House Republicans at the White House in an effort to break a logjam that has left the government shuttered for more than a week.

House Republican leaders appear to be ready to advance a short-term increase in the government's borrowing authority that would prevent a default on U.S. government debt next week. Sources told The Associated Press in Washington that House Speaker John Boehner was trying to rally support for a six-week extension for the debt ceiling.

A potential compromise between the two political parties could not come soon enough.

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.

There were hopeful signs in the market for short-term U.S. government debt early Thursday. The yield on the one-month Treasury bill dropped to 0.17 percent from 0.27 late Wednesday.

The yield had spiked from near zero at the beginning of the month to as high as 0.35 percent 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.

Among stocks making big moves:

— Teva Pharmaceuticals rose $4.40, or 3 percent, to $144.50 after the generic drug maker announced it was cutting its workforce by 10 percent.

— Ruby Tuesday plunged $1.38, or 18 percent, to $6.18. The restaurant chain reported a wider first quarter loss than expected, citing increased competition a difficult economic climate.

— Citrix Systems dropped $8.39, or 12 percent, to $58.28 after the company warned investors that its third-quarter revenue and profit will miss Wall Street's expectations.

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Andrew Taylor in Washington, D.C. contributed to this report.

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