Stocks rebound as Gang of Six deal gains support

Stocks surged Tuesday after President Obama effectively endorsed a broad deficit-reduction plan put together by the Senate's Gang of Six.

The Dow Jones Industrial Average was up more than 200 points near the end of the day's trading — good for a 1.63 percent gain. The S&P 500 was similarly up, and the NASDAQ grew by more than 2 percent in the day's trading.

Markets were already high in the morning, following strong earnings reports from companies like IBM and Coca-Cola. But the three stock indexes reached new heights for the day after the president's midday statement on the debt-limit talks.

Delivering a statement in the White House briefing room, Obama called the Gang of Six package "good news."

The plan would reduce the deficit by $3.7 trillion, and won the renewed support of Gang member Sen. Tom Coburn (R-Okla.), who had abandoned the group's talks in May. Senators from both parties offered strong support for the package after being presented with it Tuesday morning.

The day's stock gains mark a stark turnaround from Monday's trading, when stocks sank as it appeared major talks to rein in the deficit and raise the debt limit had stalled. Financial markets had largely shrugged off the debt-limit drama that has occupied Capitol Hill for months, but Monday's downturn came as the window to strike a deal before Aug. 2 grew smaller. The Treasury Department has warned that it will no longer have sufficient funds to meet all its obligations after that date without additional borrowing capacity.

The downturn in trading came on the same day that FitchRatings warned it would lower the U.S.'s AAA credit rating to B-plus by Aug. 4 if no deal is reached, coming on the heels of similar warnings from two other major credit ratings agencies.

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