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Futures hold gains amid hopes for budget resolution

U.S. stock index futures were sharply higher Thursday as investors were encouraged by signs that the political stalemate in Washington was easing.

According to a Republican leadership aide, U.S. House of Representatives Republicans are considering agreeing to a short-term increase in the government's borrowing authority, keeping a possible default after Oct. 17 at bay and buying time for negotiations on broader policy measures.

President Barack Obama and congressional leaders are set to meet on Thursday for further discussions.

"There is one major 'if' attached to the President's potential olive branch, and that is reopening the government, something that still looks very unlikely in the interim as the partisan politics from both sides continues to rage," Evan Lucas, an analyst at IG, said in a morning note.

Treasury Secretary Jack Lew testified on the debt limit before the senate panel, saying the impasse in Washington was hurting the U.S. economy and urged Congress to raise a cap on government borrowing to keep the nation from defaulting on its debt. (CNBC.com is streaming this event live.)

On the economic front, weekly jobless claims increased six-month high last week, according to the Labor Department, but the underlying trend pointed to a steadily improving labor market. California accounted for half of the increase in claims as the state continued to deal with technical glitches from its computer upgrades. And another portion of the claims were from non-federal workers affected by the government shutdown.

Boeing climbed after Canaccord Genuity started coverage of the Dow component with a "buy" rating and a price target of $140.

The Treasury will sell $13 billion of 30-year notes with the result due shortly after 1pm ET.

On Wednesday, President Barack Obama officially nominated Federal Reserve Vice Chair Janet Yellen to replace Ben Bernanke as the chairman of the central bank. Yellen is widely perceived as dovish on monetary policy and investors expect her to take a gradual path towards a reduction in the Fed's monthly $85 billion asset purchases.

—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)

On Tap This Week:

THURSDAY: Fed's Bullard speaks, natural gas inventories, 30-yr bond auction, Treasury budget*, Fed's Williams speaks, Fed balance sheet/money supply, chain-store sales, Draghi speech
FRIDAY: PPI*, retail sales*, consumer sentiment, business inventories*, Fed's Rosengren speaks, IMF annual mtg; Earnings from JPMorgan Chase, Wells Fargo

*Data will not be released due to the government shutdown.

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