"It means the credit market is really a safer place than it's been for the last few months," he said.
Since word of a compromise debt deal came Wednesday, bond yields have fallen and the dollar has tumbled, as traders worried the partisan battling would resume around the next set of deadlines for the budget in January and debt ceiling in February. The 10-year Treasury yield dipped to 2.60 percent from its Wednesday morning high of 2.76 percent, and the dollar index lost a full percent Thursday, trading at a nine-month low of 79.68.
(Read more: 'Too tender a moment' to cut QE: Fed's Fisher)
The S&P 500 Thursday, after trading lower early in the day, broke through to a new high in the afternoon in a burst of buying. The S&P 500 closed up 11 at 1733, topping its Sept. 19 high. The Dow, however, finished down 2 at 15371, dragged down by losses in IBM.
"You don't have to worry about the government anymore. A couple of speed bumps are out of the way. There's no way they're going to taper this month and the odds of them tapering in December are low," said Dan Greenhaus, chief global strategist at BTIG. Greenhaus said the stock market also is being helped by other factors, including the fact it is entering a seasonally favorable time of year.
"To the extent you think more (Fed bond) purchases are better than less, and that pushes stock prices higher, then that's supportive," he said.
(Read more: Debt fight cost US economic credibility: Gundlach)
For weeks this summer, markets had been anticipating that the Fed would start to slowly cut back on its quantitative easing program, or the hefty $85 billion in bond purchases it makes each month. Since the spring, Fed officials, in speeches and testimony, had commented repeatedly about the first steps of "tapering" bond purchases if the economy was strong enough. So the first shock to markets was when the Fed decided against announcing tapering in September, citing concerns about financial conditions but also fiscal headwinds.
Now those fiscal headwinds have come to bear, with economists saying the 16-day government shutdown likely took a bite out of the economy's already slow growth.
"We won't know the economic damage done by the shutdown for a while, and we have the uncertainty of what's going to happen with the budget negotiations through January now, and those are the reasons they said in the first place why they had to delay it," said Diane Swonk, chief economist at Mesirow Financial.
(Read more: Gartman: Bond yields going lower)
Swonk said the economy is showing signs of sluggishness, and it is in part because the Fed talk about winding down bond purchases sent rates higher. "We had less momentum in part because maybe the Fed 'mea culpa' and how they explained tapering. Rates backed up," she said. The 10-year hit 3 percent as traders braced for the Fed to start reducing its purchases of Treasury bonds and mortgage-backed securities.