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Wall Street rallies on Washington budget deal

New York City - An 11th-hour deal to end the government shutdown and raise the US debt ceiling sparked a strong rally on Wall Street Wednesday, with gains of nearly 1.4%.

The Dow Jones Industrial Average closed up 205.82 points (1.36%) at 15,373.83.

The broader S&P 500 rose 23.48 (1.38%) to 1,721.54, and the Nasdaq Composite gained 45.42 (1.20%) at 3,839.43.

Although it was not a completely done deal - final votes were still required in both houses of Congress late on Wednesday - it was expected that the crisis that had unnerved global markets would be over by Thursday.

"This agreement is likely to prevent a government default on its debt and spending as well as re-open previously closed non-essential government services," said Gary Thayer at Wells Fargo Advisors.

"However, the compromise does not resolve all the budget problems; it only provides a temporary postponement. Nevertheless, reducing the risk of default could help lift sentiment and boost economic activity over the near term."

Big banks led the surge: Bank of America, which beat profit forecasts for its third quarter, gained 2.3%, Citigroup 4.1% and JPMorgan Chase 3.2%.

In Nasdaq tech shares, Facebook led the way with a 3.3% jump while Google added 1.8%.

Fresh third-quarter earnings from a number of companies had a mixed impact.

Dow component Intel rose 1.3%, despite cutting its forecast for the rest of the year. For the third quarter the chipmaker beat forecasts slightly.

Railway operator CSX fell 0.8% despite a 1.8% gain in quarterly profits. The company pointed out a significant drop in the volume of coal it hauls.

Pepsico shares were up 2.1% despite third-quarter earnings of $1.91bn that were barely higher than a year earlier.

Apple shares were 0.5% higher despite reports that it had cut back orders for its new iPhone 5C due to slow demand in the market for the smartphone.

Toolmaker Stanley Black & Decker dropped 14.3% after sharply cutting its earnings forecast for the year, even as the company reported a 44% profit gain for the third quarter.

Bond prices surged on the news of a Washington deal. The 10-year Treasury yield fell to 2.67% from 2.72% late on Tuesday, while the 30-year dropped to 3.72% from 3.78%. Bond prices and yields move inversely.

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