NEW YORK — U.S. stocks rose Wednesday, rebounding from the benchmark index's biggest two-day slump since June, amid optimism that President Barack Obama's nominee for Federal Reserve chairman, Janet Yellen, won't rush to withdraw stimulus and signs that lawmakers could raise the debt ceiling.
Hewlett-Packard rallied 8.9 percent after saying it expects to return more cash to shareholders and see revenue stabilize after a multiyear decline. Alcoa gained 2 percent amid better-than-forecast profit. Yum! Brands sank 6.7 percent after third-quarter income fell 68 percent on lower same-store sales in China.
The Standard & Poor's 500 index climbed 0.1 percent to 1,656.40. The Dow Jones industrial average added 26.45 points, or 0.2 percent, to 14,802.98. The Nasdaq Composite index fell 0.5 percent to 3,677.78, extending its three-day slide to 3.4 percent, the most since June 24. About 7.1 billion shares exchanged hands on U.S. exchanges today, 15 percent above the three-month average.
The S&P 500 retreated 2.1 percent over the previous two days as concern grew that lawmakers may not raise the federal debt ceiling in time to avoid a government default. Economists say failure by the world's largest borrower to pay its debt will devastate stock markets from Brazil to Zurich and throw the U.S. and world economies into a recession.
The S&P 500 erased an earlier loss of as much as 0.5 percent Wednesday and the Dow rallied after touching its lowest level since June as some possible paths out of the partisan impasse in Washington started to emerge.
House Republican and Senate Democratic leaders are open to a short-term increase in the debt limit, said congressional aides of both parties who spoke on condition of anonymity to discuss strategy.
If Republicans move toward an increase, they're choosing an option President Barack Obama opened Tuesday, when he said he would accept a short-term debt limit increase and then enter broader fiscal negotiations. House Republicans will send a small group of negotiators to the White House on Thursday, Brendan Buck, spokesman for House Speaker John Boehner, said in an email.