* Senate leaders announce agreement reached
* S&P nears all-time high as VIX plummets
* Bank of America swings to profit, Intel gives weak outlook
* Indexes up: Dow 1.1 pct; S&P 1.2 pct; Nasdaq 1.1 pct
By Ryan Vlastelica
NEW YORK, Oct 16 (Reuters) - U.S. stocks surged more than 1percent on Wednesday after Senate leaders said they had a dealto reopen the federal government and raise the debt ceiling toavoid a U.S. 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 gains brought the S&P 500 index within striking distanceof the record intraday high of 1729.86 set on Sept. 19. Tradingvolume was low, 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 percent.Other groups tied to the pace of economic growth, includingenergy, also outperformed on the day.
In another sign of easing concerns, the CBOE Volatilityindex sank 19.4 percent in its biggest daily drop thisyear. However, the index remains up about 15 percent over thepast four weeks.
The Dow Jones industrial average was up 168.75points, or 1.11 percent, at 15,336.76. The Standard & Poor's 500Index was up 19.72 points, or 1.16 percent, at 1,717.78.The Nasdaq Composite Index was up 41.89 points, or 1.10percent, at 3,835.90.
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, a rate that is belowthe historical average of 63 percent. The number of companiestopping revenue forecasts has also been below the historicalaverage.
Investors will be closely watching for any sign that thegovernment shutdown and debt ceiling impasse had a negativeimpact on results or outlooks. David Joy, who oversees about$703 billion in assets as chief market strategist at AmeripriseFinancial in Boston, said he expected the political uncertaintyto erode earnings expectations going forward.
"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."
Intel Corp late Tuesday gave a revenue outlook thatmissed expectations and warned that production of its upcomingBroadwell processors was delayed. However, shares of the Dowcomponent rose 0.9 percent to $23.60 as the stock participatedin the broad market rally.
Bank of America Corp swung to a third-quarter profitas provisions for credit losses fell. Shares rose 2.1 percent to$14.54.
Shares of Yahoo fell 0.7 percent to $33.15 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 percent to $53.88.
- Investment & Company Information