By Stephen Culp
NEW YORK (Reuters) - Wall Street advanced and crude prices surged on Thursday as reports continued to surface of new developments in pandemic relief negotiations in Washington.
All three major U.S. stock indexes gained ground, with smaller cap stocks handily outperforming their larger counterparts.
U.S. House Speaker Nancy Pelosi, while expressing confidence that she would be able to reach an agreement with Treasury Secretary Steven Mnuchin, said on Thursday legislation to help airline companies survive the pandemic could only move through Congress with guarantees that lawmakers would work on "a fuller bill."
White House adviser Larry Kudlow said the Trump administration would like to see "standalone" bills to provide additional unemployment assistance and extend the Paycheck Protection Program, but also told Fox News that the economic recovery did not depend on a stimulus deal.
Senate Leader Mitch McConnell, meanwhile, warned there remain "vast differences" between Democrats and Republicans regarding the size of a new round of fiscal aid.
"Today's back and forth is a microcosm of we've been seeing the last couple of weeks," said Ryan Detrick, senior market strategist at LPL Financial in Charlotte in North Carolina. "The door seems to be open on a deal then quickly closes."
"But at least the two sides are still talking, leaving a chance for some type of resolution, potentially before election," Detrick added.
Democratic nominee Joe Biden has been advancing in the polls ahead of the Nov. 3 election.
"The chance of a blue wave is increasing and one could say the markets would like that," Detrick said. "Equity markets do not want a contested election and Biden's lead growth puts a little water on the fire."
The U.S. Labor Department reported that jobless claims remain well above the highest levels reached at the nadir of the Great Recession, suggesting the labor market recovery could be stalling.
The Dow Jones Industrial Average <.DJI> rose 122.05 points, or 0.43%, to 28,425.51, the S&P 500 <.SPX> gained 27.38 points, or 0.80%, to 3,446.83 and the Nasdaq Composite <.IXIC> added 56.38 points, or 0.5%, to 11,420.98.
European stocks joined the world rally as the signs of movement in coronavirus aid talks lifted the global mood.
The pan-European STOXX 600 index <.STOXX> rose 0.78% and MSCI's gauge of stocks across the globe <.MIWD00000PUS> gained 0.79%.
Treasury yields retreated and the yield curve flattened following weaker-than-expected economic data and amid persistent uncertainty surrounding coronavirus relief talks.
Benchmark 10-year notes <US10YT=RR> last rose 6/32 in price to yield 0.7652%, from 0.785% late on Wednesday.
The 30-year bond <US30YT=RR> last rose 18/32 in price to yield 1.5642%, from 1.589% late on Wednesday.
Crude prices topped $43 per barrel as supply was pressured by hurricane-related shutdowns, an ongoing oil worker strike in Norway, and possible OPEC production cuts.
U.S. crude futures <CLcv1> gained 3.10% to settle at $41.19 per barrel, while Brent settled at $43.34 per barrel, advancing 3.22% on the day.
(GRAPHIC: Stocks versus COVID - https://fingfx.thomsonreuters.com/gfx/mkt/yxmvjbdyyvr/Pasted%20image%201601984809410.png)
The dollar was little changed against a basket of world currencies as market participants awaited further stimulus developments.
The dollar index <.DXY> fell 0.01%, with the euro <EUR=> unchanged at $1.176.
The Japanese yen weakened 0.02% versus the greenback at 106.01 per dollar, while sterling <GBP=> was last trading at $1.2934, up 0.12% on the day.
Election uncertainty and pandemic relief optimism also boosted gold.
Spot gold <XAU=> added 0.3% to $1,893.54 an ounce.
(Reporting by Stephen Culp; Additional reporting by Marc Jones; Editing by Sonya Hepinstall)