Stocks rallied sharply at the end of last week, after news spread that lawmakers may be zeroing in on a compromise to the current impasse over the federal budget and debt limit. The S&P 500 (SNPINDEX:^GSPC) closed at 1,703 on Friday, the first time it's eclipsed the 1,700-point threshold since the middle of last month.

House Republicans put forward a proposal on Thursday that would increase the Treasury Department's ability to borrow through Nov. 22 -- it currently expires on Oct. 17 -- but conditioned it on the White House's agreement to hold more expansive talks about overhauling the budget. Talks broke down again today, however, after the president refused to negotiate on the latter.

Earlier in the week, a number of high-profile companies kicked off third-quarter earnings season. The former bellwether Alcoa (NYSE:AA) reported on Wednesday that its earnings came in better than many analysts had expected. Thanks to improvements in its smelting and aerospace units, the company reported earnings per share of $0.02, compared with a loss of $0.11 per share in the same period last year.

And on Friday, two of the nation's largest lenders announced mixed results. JPMorgan Chase (NYSE:JPM) announced its first quarterly loss under Jamie Dimon's tenure and the first such loss for the bank in nearly a decade. The company was heavily weighed down by legal costs stemming from a multitude of legal and regulatory actions, as it took a $9.2 billion charge to build its reserves to cover future related expenses.

Meanwhile, its West Coast counterpart Wells Fargo (NYSE:WFC) saw earnings rise once again to record levels, reporting earnings per share of $0.99. While its mortgage originations fell precipitously, loan growth and improvements in a variety of other noninterest income areas pushed the bottom line to record heights.

John Maxfield has no position in any stocks mentioned. The Motley Fool recommends Wells Fargo and owns shares of JPMorgan Chase and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.