U.S. Stocks Advance Amid Signs of Progress on Debt Talks

U.S. stocks rose, leaving the Standard & Poor’s 500 Index less than 1 percent from a record, amid signs lawmakers could reach a deal before the government loses its ability to borrow money in three days.

Netflix Inc. jumped 7.8 percent on reports that the company is in talks to get its service on cable operators’ set-top boxes. St. Jude Medical Inc. rose 1.6 percent after the maker of heart-rhythm devices bought specialist device maker Nanostim Inc. for $123.5 million. Whirlpool Corp. lost 6.5 percent as Cleveland Research said appliance demand has softened in the past month. Expedia Inc. slid 6.2 percent after Deutsche Bank AG cut its rating on the online travel agency.

The S&P 500 rose 0.4 percent to 1,710.14 at 4 p.m. in New York, reversing an earlier drop of as much as 0.7 percent for a fourth day of gains. The gauge is at its highest since Sept. 19 and within 16 points of its Sept. 18 record of 1,725.52. The Dow Jones Industrial Average gained 64.15 points, or 0.4 percent, to 15,301.26. About 5 billion shares changed hands on U.S. exchanges, 14 percent below the three-month average.

“Investors are encouraged that the political posturing appears to be dying down and that real negotiations are under way,” Alan Gayle, senior strategist at RidgeWorth Capital Management, said by phone from Atlanta. His firm oversees about $48 billion. “The expectation is that as long as there are genuine negotiations, that there will be a reasonable solution that will avoid a default and secondly will get the government up and running again.”

Deal Optimism

The S&P 500 erased early declines as U.S. Senate Democratic and Republican leaders said they are optimistic about ending a partial government shutdown and preventing the nation from breaching the debt ceiling in three days.

The emerging agreement would suspend the debt limit through Feb. 7, 2014, fund the government through Jan. 15 and require a House-Senate budget conference by Dec. 15, according to a Senate source familiar with the talks, who spoke on condition of anonymity to discuss them.

The benchmark index rose 0.8 percent last week on speculation lawmakers would reach an agreement that would prevent a government default. The gauge slumped earlier today after lawmakers failed to report progress over the weekend.

The government will exhaust its $16.7 trillion borrowing authority Oct. 17. Without legislative action, the U.S. would start missing payments sometime between Oct. 22 and Oct. 31, according to the Congressional Budget Office.

Recession Risk

The government has been partially shut down since Oct. 1 after Congress failed to pass a spending authorization bill for the financial year. Some official services remain suspended and hundreds of thousands of workers are on unpaid leave.

The prospect of a U.S. default threatens the U.S. and world economies, International Monetary Fund Managing Director Christine Lagarde said.

“If there is that degree of disruption, that lack of certainty, that lack of trust in the U.S. signature, it would mean massive disruption the world over,” Lagarde said in an interview on NBC. “And we would be at risk of tipping, yet again, into recession.”

In China, exports unexpectedly fell 0.3 percent in September from a year earlier, according to a report from the General Administration of Customs on Oct. 12. That trailed all 46 estimates in a Bloomberg survey.

Earnings Season

The S&P 500 has gained 1.7 percent since the shutdown began Oct. 1 after rallying 4.7 percent in the third quarter as the Federal Reserve unexpectedly maintained the pace of monetary stimulus and corporate earnings surpassed estimates.

Third-quarter earnings season resumes tomorrow with expected reports before the market opens from Citigroup Inc., Coca-Cola Co., Johnson & Johnson and Omnicom Group Inc. Yahoo Inc. and Intel Corp. are scheduled to report after the market closes.

Profits for companies in the S&P 500 probably increased 1.4 percent during the three months while sales rose 2 percent, according to analysts’ estimates compiled by Bloomberg.

JPMorgan Chase & Co. and Wells Fargo & Co. last week began the earnings season for banks. JPMorgan reported its first quarterly loss under Chief Executive Jamie Dimon amid a $7.2 billion charge to cover the cost of litigation and regulatory probes. Wells Fargo reported record profit even as mortgage banking revenue plunged 43 percent.

Eight of 10 main industry groups in the S&P 500 rose as health-care and energy stocks added at least 0.6 percent for the largest gains.

Volatility Gauge

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options prices known as the VIX, rose 2.2 percent to close at 16.07, after surging as much as 13 percent. The gauge slipped 6.1 percent last week.

Netflix rose 7.8 percent to $324.36, leading gains among stocks in the Nasdaq 100 Index, which closed today at its highest level since 2000.

The online video-streaming service is in talks to add its application to the set-top boxes of U.S. cable-television operators including Comcast Corp. and Time Warner Cable Inc., according to three people familiar with the matter. The stock’s gains accelerated after Netflix said it ordered a 13-episode thriller series from Sony Pictures Television.

St. Jude jumped 1.6 percent to $56.03 after completing its acquisition of Nanostim, whose core technology, a wireless pacemaker implanted entirely inside the heart, won European Union approval. St. Jude invested in Nanotism in 2011 and had said in February it would buy the shares it did not own by the end of this year.

Homebuilders Sink

Advanced Micro Devices Inc. gained 3.7 percent to $3.97. Wedbush Securities Inc. analyst Betsy Van Hees upgraded her rating to the equivalent of buy from hold. The analyst expects the chipmaker’s third-quarter earnings to reach 6 cents per share, surpassing the 2 cents average expectation from analysts surveyed by Bloomberg. AMD is expected to report results Oct. 17.

An S&P 500 index of homebuilders sank 1.2 percent. D.R. Horton Inc. retreated 2.1 percent to $18.25 and PulteGroup Inc. slipped 0.7 percent to $15.99.

Order prices may show slower growth in the third quarter as rising interest rates sap pricing power, and builders may increase incentives to generate demand in some communities, Bloomberg Industries said in separate reports today.

Whirlpool lost 6.5 percent to $131.29 for the biggest drop in the S&P 500. Demand for appliances in the U.S. has softened in the past month, Cleveland Research, which maintained its neutral rating on Whirlpool shares, said in a note.

Expedia, Coach

Expedia slid 6.2 percent to $48.51 as Deutsche Bank downgraded the stock to hold from buy, citing transition risks following recent management changes at Expedia’s Hotels.com unit. The company faces increased competition in the U.S., Deutsche Bank’s Ross Sandler wrote in the note.

Merck & Co. fell 1.1 percent to $46.75. Sanford C. Bernstein & Co. cut its rating on the stock to the equivalent of hold, as the firm said 2013 is unlikely to be a “great year” for the pharmaceutical company and sees only average prospects for long-term revenue and earnings growth.