On Thursday, analysts spotlighted the news that the White House and congressional Democrats were moving toward dropping corporate tax increases they had wanted to include in the bill, as they hoped to forge a deal that could clear the Senate. A spending deal without corporate tax increases would be a potential boon to profits and share prices.

“A stay of execution on higher corporate tax rates would seem a potentially noteworthy development,” Daragh Maher, a currency analyst with HSBC Securities, wrote in a note to clients on Thursday.

An agreement among Democrats on what’s expected to be a roughly $2 trillion spending plan would also open the door to a separate $1 trillion bipartisan infrastructure plan moving through Congress. Progressives in the House are blocking the infrastructure bill until agreement is reached on the larger bill.

But the prospects for an agreement have helped to lift shares of major engineering and construction materials companies. Terex, which makes equipment used for handling construction materials like stone and asphalt, has jumped more than 5 percent this week. The asphalt maker Vulcan Materials has risen more than 4 percent. Dycom, which specializes in construction and engineering of telecommunication networking systems, was up more than 9 percent.

The renewed confidence remains fragile, with good reason. The coronavirus continues to affect business operations around the world, and the Delta variant demonstrated just how disruptive a new iteration of the virus can be.

Another lingering concern involves the higher costs companies face for everything from raw materials to shipping to labor. If they are unable to pass those higher costs on to consumers, it will cut into their profits.

“That would be big,” Mr. McKnight said. “That would be a material impact to the markets.”

But going into the final months of the year — traditionally a good time for stocks — the market also has plenty of reasons to push higher.

The recent weeks of bumpy trading may have chased shareholders with low confidence — sometimes known as “weak hands” on Wall Street — out of the market, offering potential bargains to long-term buyers.

“Interest rates are relatively stable. Earnings are booming. Covid cases, thankfully, are dropping precipitously in the U.S.,” Mr. Zemsky said. “The weak hands have left the markets and there’s plenty of jobs. So why shouldn’t we have new highs?”

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Treasury’s Janet Yellen Is Being Tested by Debt Limit Fight

Ms. Yellen’s task has been complicated by the fact that while she can readily convey the economic risks of default, the debt limit has become wrapped up in a larger partisan battle over Mr. Biden’s entire agenda, including the $3.5 trillion spending bill.

Republicans, including Mr. McConnell, have insisted that if Democrats want to pass a big spending bill, then they should bear responsibility for raising the borrowing limit. Democrats call that position nonsense, noting that the debt limit needs to be raised because of spending that lawmakers, including Republicans, have already approved.

“This seems to be some sort of high-stakes partisan poker on Capitol Hill, and that’s not what her background is,” said David Wessel, a senior economic fellow at the Brookings Institution who worked with Ms. Yellen at Brookings.

While lawmakers squabble on Capitol Hill, Ms. Yellen’s team at Treasury has been trying to buy as much time as possible. After a two-year suspension of the statutory debt limit expired at the end of July, Ms. Yellen has been employing an array of fiscal accounting tools known as “extraordinary measures” to stave off a default.

Uncertainty over the debt limit has yet to spook markets, but Ms. Yellen is receiving briefings multiple times a week by career staff on the state of the nation’s finances. They are keeping her informed about the use of extraordinary measures, such as suspending investments of the Exchange Stabilization Fund and suspending the issuing of new securities for the Civil Service Retirement and Disability Fund, and carefully reviewing Treasury’s cash balance. Because corporate tax receipts are coming in stronger than expected, the debt limit might not be breached until mid- to late October, Ms. Yellen has told lawmakers.

A Treasury spokeswoman said that Ms. Yellen is not considering fallback plans such as prioritizing debt payments if Congress fails to act, explaining that the only way for the government to address the debt ceiling is for lawmakers to raise or suspend the limit. However, she has reviewed some of the ideas that were developed by Treasury during the debt limit standoff of 2011, when partisan brinkmanship brought the nation to the cusp of default.

A new report from the Bipartisan Policy Center underscored the fact that if Congress fails to address the debt limit, Ms. Yellen will be left with no good options. If the true deadline is Oct. 15, for example, the Treasury Department would be approximately $265 billion short of paying all of its bills through mid-November. About 40 percent of the funds that are owed would go unpaid.

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The U.S. budget deficit hit a record $1.7 trillion in the first half of the fiscal year.

The United States budget deficit grew to a record $1.7 trillion in the six months since October, as the federal government continued to pump huge sums of money into the economy to help workers and businesses cope with the pandemic.

The figure comes in the wake of a $1.9 trillion economic rescue package that Congress passed in March and as the Biden administration and Democrats are considering spending trillions of dollars more on a sweeping legislative package to overhaul the nation’s infrastructure.

Federal spending is far outpacing revenue — the United States is doling out twice as much money as it takes in, having spent a record $3.4 trillion so far this fiscal year, which began Oct. 1, and collected just $1.7 trillion in tax revenue.

The spending continued at a record clip in March, when the government spent $927 billion, the highest total on record for any March and the third highest total of any month to date. The deficit for March was $660 billion.

A Treasury official said that the data showed a substantial increase from a year ago, when the pandemic was just setting in and the economy was starting to shed jobs. The budget deficit, which is the gap between what the government spends and what it takes in, is expected to continue to swell in the coming months as money from the stimulus bill continues to roll out.

In the first six months of the fiscal year, spending was up sharply for nutrition assistance programs, economic impact payments and expanded jobless benefits. Money for small-business loans made through the Paycheck Protection Program and funds for education and health providers also contributed to the record outlays.

Economic policymakers have said that the budget shortfall is a long-term concern but that it is manageable now.

“The U.S. federal budget is on an unsustainable path,” Jerome H. Powell, the Federal Reserve chair, said on CBS’s “60 Minutes” on Sunday. “Meaning the debt is growing faster than the economy. And that’s kind of unsustainable in the long run.”

He added: “That doesn’t mean debt is at an unsustainable level today. It’s not. We can service the debt we have.”

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A K-Shaped Recovery, This Time on a Global Scale

WASHINGTON — The global economy is rebounding from the coronavirus pandemic faster than previously expected, largely thanks to the strength of the United States. But the International Monetary Fund warned on Tuesday that an uneven rollout of vaccines posed a threat to the recovery, as the fortunes of rich and poor countries diverge.

The global dynamic echoes the “K-shaped” recoveries that are playing out worldwide. While many wealthy nations are poised for a major economic expansion this year, other nations’ struggles could reverse decades of progress in fighting poverty. Top international economic officials warned this week that this divergence, which is being amplified by sluggish deployment of vaccines in developing countries, is a threat to stability and long-term growth.

“Economic fortunes within countries and across countries are diverging dangerously,” Kristalina Georgieva, managing director of the I.M.F., said at a panel discussion on Tuesday during the annual spring meetings of the fund and the World Bank.

This week, Treasury Secretary Janet L. Yellen emphasized that point, saying in a speech that the inability of low- and middle-income countries to invest in robust inoculation programs could result in “a deeper and longer-lasting crisis, with mounting problems of indebtedness, more entrenched poverty and growing inequality.”

upgrading its global growth forecast for the year thanks to vaccinations of hundreds of millions of people, efforts that are expected to help fuel a sharp economic rebound. It now expects the global economy to expand by 6 percent this year, up from its previous projection of 5.5 percent, after a contraction of 3.3 percent in 2020.

The wealthiest countries are leading the way out of the crisis, particularly the United States, whose economy is now projected to expand by 6.4 percent in 2021. The euro area is expected to expand by 4.4 percent and Japan is forecast to expand by 3.3 percent, according to the I.M.F.

Among emerging market and developing economies, China and India are expected to drive growth. China’s economy is projected to expand by 8.4 percent, offering its own significant boost to overall global growth, and India’s is expected to expand by 12.5 percent.

But within advanced economies, low-skilled workers have been hit the hardest and those who lost jobs could find it difficult to replace them. And low-income countries are facing bigger losses in economic output than advanced economies, reversing gains in poverty reduction and risking long-lasting pandemic-era scars.

Emerging market economies in many cases have fewer resources for fiscal stimulus, vaccine investments and labor force retraining — factors that put them at risk of falling behind and getting stuck as the world starts its rebound.

Researchers at the I.M.F. pointed out in a recent blog post that it was important that rates on U.S. debt are rising because of a strengthening economic outlook, one that will benefit many economies by stoking demand for their exports. Still, “countries that export less to the United States yet rely more on external borrowing could feel financial market stress.”

Most U.S. officials have focused on how stronger domestic growth could actually help the rest of the world as American consumers buy foreign goods and services. “This year the U.S. looks like it’s going to be a locomotive for the global economy,” Richard H. Clarida, the vice chair of the Fed, said during a recent speech.

Ms. Yellen made a similar argument on Tuesday during a panel discussion at the I.M.F., at which she urged countries not to let up on fiscal support.

“Stronger growth in the U.S. is going to spill over positively to the entire global outlook and we are going to be careful to learn the lessons of the financial crisis, which is ‘don’t withdraw support too quickly,’” she said.

There are risks that spillovers could work the other way — slower vaccination progress abroad could come to weigh on American and global improvement. While roughly 500 doses of the vaccine have been administered per 1,000 people in the United States, based on New York Times vaccination data, that number is about 1 per 1,000 in Mali and Afghanistan.

Economist Intelligence Unit.

“There’s a race right now between these variants of concern and vaccines,” she said during a webcast event Tuesday. She urged “global cooperation and attention” to how disparities in vaccine distribution affect inequality and economic recoveries.

The I.M.F. agrees. Vitor Gaspar, the fund’s director of fiscal affairs, said that advanced economies would continue to be at risk even if the virus were raging in developing countries that are not major economic powers, noting that the virus cannot be eradicated anywhere until it is eradicated everywhere. For that reason, he said, investing in vaccinations is critical.

“Global vaccination is probably the global public investment with the highest return ever considered,” Mr. Gaspar said in an interview. “Vaccination policy is economic policy.”

While global policy bodies are warning about diverging growth and public health outcomes, some Wall Street economists have taken a more optimistic tone.

“We think market participants underestimate the likely pace of improvement in both the public health situation and economic activity in the remainder of 2021,” Jan Hatzius at Goldman Sachs wrote in an April 5 research note.

Vaccinations are high or progressing in Canada, Australia, Britain and the euro area. In emerging markets, Mr. Hatzius wrote, Goldman economists expect 60 to 70 percent of the population to have “at least some immunity” by the end of the year when counting prior coronavirus infection and vaccine proliferation.

“The laggards are China and other Asian countries, although this is mainly because Asia has been so successful in virus control,” he wrote.

How fast global recoveries proceed could be critical to the policy outlook, both in government support spending and in central bank monetary help.

From the Fed to the European Central Bank and Bank of Japan, monetary authorities have employed a mix of rock-bottom rates, huge bond purchases and other emergency settings to try to cushion the pandemic’s fallout.

Organizing bodies have echoed Ms. Yellen’s comment: They argue that it’s important to see the recovery through, rather than pulling back on economic help early.

Global policymakers “generally view the risks to financial stability associated with early withdrawal of support measures as currently greater than those associated with a late withdrawal,” Randal K. Quarles, the Federal Reserve’s vice chair for supervision and head of the global Financial Stability Board, said in a letter released Tuesday.

The I.M.F. said on Tuesday that it was keeping a close eye on interest rates in the United States, which could pose financial risks if the Fed raises them unexpectedly. It also urged countries to maintain targeted fiscal support — and to be ready to provide more if future waves of the virus emerge.

“For all countries, we’re not out of the woods, and the pandemic is not over,” said Gita Gopinath, the I.M.F.’s chief economist.

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