Republicans proposed a six-week extension on the government's credit line that would avoid default on Oct. 17 or thereabouts, the date the Treasury predicts with some acknowledged margin for error the government will run too low on cash to pay its bills.
That would not bring furloughed government employees back to work but the White House signaled President Barack Obama would accept a short-term solution.
The Labor Department said Thursday first-time unemployment claims jumped by 66,000 in the week that ended Saturday, which was attributed not to laid off federal workers, but to computer problems in California and to workers at jobs that count on a functioning federal government to stay afloat -- defense contractors, for example.
On Wall Street, the Dow Jones industrial average added 323.09 points or 2.18 percent to close at 15,126.07. The Standard & Poor's 500 gained 36.16 points or 2.18 percent, to 1,692.56. The Nasdaq gained 82.97 points or 2.26 percent to 3,760.75.
On the New York Stock Exchange, 2,657 stocks advanced while 450 declined on volume of 3.3 billion shares.
The 10-year U.S. treasury note fell 6/32 to yield 2.685 percent.
In Japan, the Nikkei 225 index added 156.87 points, 1.12 percent, to 14,194.71.
In Britain, the London FTSE gained 92.58 points or 1.46 percent to 6,430.49.
On currency markets, the euro rose to $1.352 and the dollar rose to 98.20 yen.
Crude oil added $1.31 or 1.29 percent to $102.90 on the New York Mercantile Exchange. On the Comex division, gold lost $21.70 to $1,285.50 per troy ounce while silver shed 24.6 cents to $21.645.
On the Chicago Board of Trade, corn for December delivery dropped 4 1/4 cents to $4.39 1/4 per bushel. Soybeans for November added 1/4 cent to $12.88. Wheat shed 5 cents to settle at $6.85 1/2.