United States stocks soared, on pace for their second-best day this year as lawmakers moved closer to a deal to break up the political impasse in Washington.
The Dow Jones Industrial Average climbed 234 points, or 1.6%, to 15,038 points. For the blue chips, Thursday's advance was on pace to be the biggest since January.
The S&P 500 index jumped 27 points, or 1.7%, to 1,684 points.
The Nasdaq Composite Index climbed 71 points, or 1.9%, to 3,749 points.
Thursday's rally returned the S&P 500 to levels last seen before the US government entered its first shutdown in 17 years on Oct. 1 and endangered the country's ability to borrow.
"It got noisy with both sides digging in, but pressure was ratcheting up in the markets," Fenimore Asset Management. director of research and portfolio management John Fox said.
The Dow had lost 5.6% since hitting a record on Sept. 18 but ended Wednesday up 13% for the year. Mr Fox said his firm did some buying of favourite stocks during the recent swoon but is finding it harder to find stocks that look cheap.
The progress in Washington eased selling pressure in short-term US debt markets. The yield on the T-bill due Oct. 17 topped 0.5% early Thursday but since has tumbled to as low as 0.215% and recently traded at 0.385%. Bond prices rise when their yields fall.
The T-bill due Nov. 7, the benchmark one-month T-bill, traded at 0.24% Thursday, down from 0.279% Wednesday. The yield rose above 0.35% on Tuesday, the highest level since the depth of the financial crisis in 2008.
Financial, consumer discretionary and industrial companies stocks--those hit hardest in recent days--jumped Thursday. Defensive sectors lagged behind, with utility stocks in the S&P 500 rising less the broader market.
Traders said the snap back in stocks was led by investors exiting from positions built to protect portfolios from declines in the stock market. Rick Fier, director of equity trading Conifer Securities, said his clients weren't yet committing much new money to buying stocks.
"It's not euphoric," Mr Fier said.
"Washington is less of a question mark, but we're not at a point where we can say this is off the table and can focus on earnings."
House Republicans will offer the White House a six-week extension of the nation's borrowing limit in exchange for wide-ranging negotiations on spending. The measure could be a potential breakthrough to the logjam that has shut down part of the government and threatens the ability for the US to borrow, but wouldn't reopen the government, according to The Wall Street Journal.
Chris Bertelsen, chief investment officer at Global Financial Private Capital, said he tends to be skeptical until he sees an actual agreement.
"We're getting signs of a thaw; it does make me feel better," Mr Bertelsen said. "But I tend to be skeptical until there's an actual agreement."
Initial claims for jobless benefits in the latest week shot up by 66,000 to 374,000, the most seen since March and above expectations of 312,000. Most of the rise reflected continued reporting problems in California.
Jobless claims can be reported during the partial government shutdown, which has entered its 10th session, as the data are mostly compiled by the states.
European markets rose, with the Stoxx Europe 600 climbing 1.7% to bounce off a one-month low. The Bank of England kept its benchmark interest-rate and bond-buying program intact, as was widely expected.
Asian markets were mixed. Japan's Nikkei Stock Average rose 1.1%, boosted by weakness in the yen, while China's Shanghai Composite dropped 0.9% ahead of key economic data due out over the weekend.
The yield on the 10-year Treasury note rose to 2.695% from 2.652% late Wednesday. October gold futures fell 0.8% to $1,301 a troy ounce. November crude-oil futures advanced 1.5% to $103.11 a barrel. The dollar gained ground against the yen but slipped against the euro.
Recently beaten-up stocks got a lift in Thursday's action. Tesla Motors climbed 2.5% after shedding 7.8% the past two sessions. Netflix and Facebook also rose.
In other corporate news, Citrix Systems slumped 12% after the business-software maker cut its earnings and revenue outlook for the third quarter.
Ruby Tuesday dropped 16% after the casual-dining chain reported a wider-than-anticipated fiscal first-quarter loss and disappointing sales.
L Brands fell 3.7% after announcing same-store sales in September were less than expected at Victoria's Secret.
Teen retailer Buckle fell 8.6% after posting a 4.5% decline in same-store sales. An increase in sales was expected.