US STOCKS-Wall St extends gains as Republicans unveil plan to avert default


* Republicans unveil plan to raise U.S. debt limit

* CBOE Volatility index plunges, near pre-governmentshutdown levels

* U.S. jobless claims at 6-month high but trend improving

* Indexes up: Dow 1.6 pct, S&P 1.7 pct, Nasdaq 2 pct

By Angela Moon

NEW YORK, Oct 10 (Reuters) - U.S. stocks rallied onThursday, with major stock indexes up nearly 2 percent on signsof progress in negotiations to raise the U.S. debt limit just aweek before a deadline.

Ahead of a meeting with President Barack Obama, Republicansin the House of Representatives unveiled a plan that would averta looming U.S. default. The offer to raise the debt ceiling is asignificant shift for Republicans, who had hoped to extractconcessions on spending and health care.

The CBOE Volatility index VIX, often used to measurethe level of investor anxiety, plunged more than 15 percent to16.65, back near levels prior to the U.S. government shutdown.

"Hopes amongst investors are growing that a thaw is startingto make its presence felt," said Andrew Wilkinson, chiefeconomic strategist at Miller Tabak & Co in New York.

"Thinking back to December 2012 when the fiscal cliff wasfast approaching, investor confidence was repeatedly batteredfollowing a series of meetings that failed to hammer a positiveoutcome. Bottom line, we'll believe it when we see it."

Reflecting the eased investor sentiment, the spread betweenspot VIX contracts and 3-month VIX futures turnedpositive on Thursday after days of being negative. VIX futuresare generally more expensive than spot VIX contracts. When thespread moves into negative, it tends to be a bearish sign forthe stock market.

A partial U.S. government shutdown has continued 10 daysafter congressional Republicans refused to pass a budget for thenew fiscal year without an attachment to defund Obama'shealthcare law.

U.S. Treasury Secretary Jack Lew said the gridlock inWashington was hurting the U.S. economy, and urged Congress toraise a cap on government borrowing to keep America fromdefaulting on its debt.

The Dow Jones industrial average was up 233.96points, or 1.58 percent, at 15,036.94. The Standard & Poor's 500Index was up 27.98 points, or 1.69 percent, at 1,684.38.The Nasdaq Composite Index was up 71.58 points, or 1.95percent, at 3,749.36.

Data showed the number of Americans filing new claims forjobless aid touched a six-month high last week as acomputer-related backlog of claims was processed and the partialgovernment shutdown hit some non-federal workers.

This year's high-flying tech stocks - such as Facebook Inc, up 5.6 percent at $49.36, and Inc,up 2.4 percent at $305.40 - rebounded after several days ofdeclines.

The Nasdaq 100 technology sector was up 1.6 percentafter having shed 2.8 percent over the last three sessions, itsbiggest three-day drop since late June.

Best Buy Co Inc shares jumped 7 percent to $38.81 inheavy volume early on Thursday. The electronics retailer isabout to launch a trade-in promotion program where customers canswap an old smartphone for a $100 gift card that can be used tobuy the new Apple iPhone 5s and 5c.

Citrix Systems Inc shares were off 11 percent at$59.06 after the cloud computing software maker estimatedquarterly results below analysts' expectations as businessesdelayed contracts.

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