Stocks closed with small gains Wednesday as worries about a debt default were offset by a positive reaction to the news President Obama is nominating Janet Yellen to succeed Ben Bernanke to be the next chief at the Federal Reserve.
Signs that lawmakers are possibly making moves to end a stalemate in Washington and avert a U.S. government debt default also brought some hope.
President Barack Obama is making plans to talk with Republican lawmakers at the White House in the coming days as pressure builds on both sides to resolve their deadlock over the federal debt limit and the partial government shutdown before the U.S. Treasury's borrowing authority is exhausted next week.
The Dow Jones industrial average rose 26.45 points, or 0.2%, to 14,802.98, and the Standard & Poor's 500 index added 0.95, or 0.1%, to 1,656.40. The Nasdaq composite index fell 17.06 points, or 0.5% to 3,677.78.
Investors were also digesting the minutes from the Federal Reserve's Sept. 17-18 meeting where policymakers sharply debated whether to pare back the central bank's bond-buying stimulus, but in the end were largely united in their decision to wait until the evidence show a sustained pickup in economic growth.
But most Fed policymakers continue to believe tapering of bond purchases will start this year, the minutes showed.
FED POLICY: Minutes show policymakers debated tapering
Third quarter earnings season began as companies were reporting mixed profit news. Alcoa shares rose about 2% after the company reported aluminum demand increased, but KFC owner Yum brands fell almost 7% after reporting disappointing results.
Men's Wearhouse soared after Jos. A. Bank Clothiers said that it's bidding $2.3 billion for the company.
TAKEOVER BID: Men's Wearhouse rejects Jos. A. Bank's $2.3B offer
Investors were generally pleased by President Obama's plan to nominate Janet Yellen as the next chairman of the Federal Reserve.
"I think it's more politics than reality, but it's slightly positive for investor sentiment, certainly," said Andrew Sullivan, director of Asian sales trading at Kim Eng Securities.
FEDERAL RESERVE: Wall Street encouraged with Obama's nod to Yellen
In the prior session, the Dow fell 1.1% to close at 14,776.53 while the S&P 500 dropped 1.2% to 1,655.45. The Nasdaq declined 2% to 3,694.83. The steep drops came as investors are getting nervous about an approaching Oct. 17 deadline to raise the debt ceiling.
The International Monetary Fund warned about the harm to the global economy if the U.S. failed to raise its borrowing limit.
Markets in Asia were mixed Wednesday. Japan's Nikkei 225 index added over 1% to 14,037.84 but Hong Kong's Hang Seng index dropped 0.6% to 23,033.97.
In Europe, the major benchmarks were also mixed. Britain's FTSE 100 index fell 0.4% to 6,337.91 and Germany's DAX index dropped 0.5% to 8,516.69. France's CAC 40 index fell 0.2% to 4,127.05.
Benchmark crude for November delivery fell $2.16 to $101.33 a barrel. The contract rose 46 cents to settle at $103.49 on Tuesday.
In government bond trading, the yield on the 10-year Treasury note rose to 2.65% from 2.63% Tuesday.
Contributing: Associated Press