At 10 a.m. New York time this morning stocks looked they were headed to another dismal day. The Standard & Poor’s 500 had lost 1.35% at that point.
And then Senate GOP leader Mitch McConnell said he would be willing to vote with Democrats to raise the ceiling on U.S. debt through November.
And by 2:25 p.m. the Standard & Poor’s had erased its earlier losses to move to a gain of 0.21% for the day.
The modest move higher after the McConnell announcement is a reflection of how little Senate Republicans are offering. The proposal would increase the debt ceiling by a fixed dollar amount that would be sufficient to tide the treasury over until December.
Republicans are still refusing to vote for a longer term solution, saying that Democrats must use their slim 50+1 edge in the Senate to pass a longer term debt ceiling extension through reconciliation using only Democratic votes. So far Republicans have filibustered in the Senate to prevent a debt ceiling bill from even coming to a vote.
Treasury Secretary Janet Yellen has said that the government will be unable to meet its obligations after October 18, which would force the United States into at least a “selective” default on some of its bills and debt obligations.
Wall Street is understandably nervous at the possibility of a default since it threatens U.S. interest rates and the country’s credit rating.
Democrats have said that reconciliation is a cumbersome process that could not be completed, probably, by the October 18 deadline. McConnell’s offer today would give Democrats enough time to use reconciliation but nothing more.
Senate Majority Leader Chuck Schumer plans to hold a vote today that would advance a bill to suspend the debt ceiling until December 2022. Republicans are expected to filibuster to prevent a vote.
As of 2:25 p.m. New York time the yield on the 10-year Treasury had dropped by one basis point to 1.52%.
The CBOE S&P 500 Volatility Index (VIX) was up 2.07% to 21.74.