Potential Deal in Washington Spikes SPDR (SPY), Other Major Equities ETFs

Joel Anderson  |

The bull day for the markets carried some of the most prominent ETFs with it. News that House Republicans may be considering advancing a bill that would temporarily raise the debt ceiling sparked optimism Thursday, helping the Dow Jones Industrial Average, S&P 500, and Nasdaq all make their biggest gains since January. In early trading, the Dow gained over 1.5 percent, the S&P rose almost 1.75 percent, and the Nasdaq was up over 2 percent.

The major spike in the major indices prompted the biggest ETFs to move as well. The SPDR S&P 500 ($SPY) jumped almost 1.75 percent, the Select Sector Financial SPDR ($XLF) climbed almost 2.5 percent, the iShares Russell 2000 Index ($IWM) gained over 2.25 percent, and the PowerShares QQQ ($QQQ) leapt almost 2 percent.

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Potential for Debt-Ceiling Deal has Markets Excited

While none of the parties involved are saying so publicly, the news Thursday morning seemed to indicate a real chance that the stalemate over the debt ceiling could be drawing to a close. After leaving a meeting of the Republican Caucus, Speaker of the House John Boehner said his part would propose a debt limit increase that would give the nation six more weeks of breathing room. Boehner said he wanted a chance to sit down with President Obama and have substantive talks about budget concerns in exchange.

"Once Republicans in Congress act to remove the threat of default and end this harmful government shutdown, the president will be willing to negotiate on a broader budget agreement," said the White House in a statement.

While both sides still appear intent on continuing to posture, traders and investors appeared to interpret this development as a sign that a deal would be reached well ahead of a potential government default.

Broad Gains by Major ETFs

Not only were ETFs tracking major indices making gains, many ETFs tracking more speculative interests made gains as investors appeared to be ready to shift back towards a more risk-on environment in the wake of the news out of Washington.

The iShares Emerging Markets Index (EEM) gained about 1.75 percent, the iShares NASDAQ Biotechnology Index ($IBB) gained over 3 percent after shedding almost 8.5 percent over the previous three days, and the Direxion Daily Small Cap Bull 3X Shares ($TNA) leapt over 6.5 percent.

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