* Senate leaders announce agreement reached
* S&P nears all-time high as VIX plummets
* IBM, eBay shares lower after results
* Indexes up: Dow 1.4 pct; S&P 1.4 pct; Nasdaq 1.2 pct
By Ryan Vlastelica
NEW YORK, Oct 16 (Reuters) - U.S. stocks closed more than 1percent higher on Wednesday after Senate leaders said they had adeal to reopen the federal government and raise the debtceiling, which would avoid the threat of a debt default.
U.S. Senate Majority Leader Harry Reid and Senate Republicanleader Mitch McConnell said senators had come to an agreementthat will reopen the government through Jan. 15 and raise thedebt ceiling until Feb. 7. The House of Representatives plannedto vote on the measure later in the day.
The day's gains brought the S&P 500 within a few points ofits all-time closing high of 1,725.52 on Sept. 18. Volume hasbeen below average, however, as many investors stayed on thesidelines until a resolution of the fiscal issues was official.
"It looks like we'll get through this, which brings themarket a bit of a reprieve. Not only is this a relief rally, butwe're still in an environment with a very accommodative monetarypolicy, which provides a tailwind," said Judy Moses, portfoliomanager at Evercore Wealth Management in San Francisco.
Gains were broad, with all 10 S&P 500 sectors solidlyhigher, led by financial stocks, which rose 2.1 percent.Other groups tied to the pace of economic growth, includingenergy, also jumped. Crude oil rose 1 percentwhile gold was essentially flat.
In another sign of easing concerns, the CBOE Volatilityindex sank 21 percent in its biggest daily drop sinceAug. 2011. However, the index remains up about 12 percent overthe past four weeks.
About 78 percent of stocks traded on the New York StockExchange ended higher while 69 percent of Nasdaq-listed sharesclosed up.
After the market closed, IBM reported earnings thatbeat expectations but revenue below consensus, sending sharesdown 6 percent to $175.56. Online auction site eBay Inc fell 4.5 percent to $51.10 after a disappointing sales forecastfor the holiday season.
American Express Co reported a 9.3 percent rise inearnings after the bell on Wednesday, but shares were flat inextended trading.
The Dow Jones industrial average was up 205.82points, or 1.36 percent, at 15,373.83. The Standard & Poor's 500Index was up 23.48 points, or 1.38 percent, at 1,721.54.The Nasdaq Composite Index was up 45.42 points, or 1.20percent, at 3,839.43.
While the issues in Washington continued to be the market'sprimary driver, analysts said the focus would likely turn to the third-quarter earnings season.
"In general, revenue growth has been challenged, andespecially in technology shares there's been low revenuegrowth," said Moses, who helps oversee $4.7 billion in assets.
With 11 percent of S&P 500 companies having reported, about57 percent have topped profit expectations, below the historicalaverage of 63 percent. The number of companies topping revenueforecasts has also been below the historical average.
Investors will be closely watching for any sign that thegovernment shutdown and debt ceiling impasse had a negativeimpact on results or forecasts. David Joy, who oversees about$703 billion in assets as chief market strategist at AmeripriseFinancial in Boston, said he expected political uncertainty toerode earnings expectations.
"To me the market has yet to reflect the reality of theeconomic damage and the psychological damage this has done," Joysaid. "I think it's awfully aggressive to think fourth-quarterearnings are going to be up 9 percent, given the shutdown ... myinstinct is to sell into this rally."
In its Beige Book report, the Federal Reserve said U.S.growth continued to chug along at a "modest to moderate pace" inSeptember and early October, providing the fullest update on theeconomy since a government shutdown halted publication of mostdata.
Intel Corp's revenue outlook missed expectationsand the Dow component warned that production of its upcomingBroadwell processors was delayed. However, shares rose 1.3percent to $23.69 as the stock participated in the broad marketrally.
Bank of America Corp swung to a third-quarter profitas provisions for credit losses fell. Shares rose 2.2 percent to$14.56.
Shares of Yahoo fell 0.9 percent to $33.09 a dayafter the company took down its own forecast for the full 2013year, trimming the midpoint of its net revenue guidance from$4.5 billion to $4.425 billion.
J.P. Morgan Chase & Co will pay $100 million tosettle charges for the "London Whale" trading scandal, theCommodity Futures Trading Commission said on Wednesday. Sharesof the Dow component rose 3.2 percent to $54.
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