(CNN) — Dow and S&P gain more than 1.5%, posting best day since September. Nasdaq adds 2.2%, logging best day since July.
On Monday U.S. stocks opened higher as investors saw signs of progress in resolving the fiscal cliff.
The broad rally started last Friday, after President Obama and congressional leaders wrapped up their first fiscal cliff meeting since the election. Investors were encouraged after both Democrats and Republicans emerged from the meeting with a confident tone and suggested that agreement could be reached before Jan. 1, when federal spending cuts and tax increases are scheduled to take effect.
While the rhetoric out of Washington is slightly more positive, stocks will remain under pressure and trading will likely be choppy until an actual deal is finalized.
Even factoring the day’s gains, the three major indexes are well off their multi-year highs reached earlier this fall. The Dow and S&P 500 are down about 6%, while the Nasdaq is down more than 8%. Last week, the tech-heavy index had briefly entered correction territory when its slide has extended to 11%.
Meanwhile, two better-than-expected reports on the housing market also gave markets a lift Monday. Existing home sales rose 2.1% to an annual rate of 4.79 million in October, despite the impact of Superstorm Sandy. That compares with analysts’ estimates for a rate of 4.70 million. And the National Association of Home Builders’ sentiment index rose for a seventh straight month to 46, its highest level since May 2006. Analysts were expecting a reading of 42.
Investors are also keeping a close eye on escalating violence in the Middle East between Israel and Islamist political group Hamas. Oil prices have been ticking up amid growing concern about a possible ground war in Gaza.
Crude oil for January delivery rose 3%, rising above $89 a barrel. Brent crude — Europe’s benchmark — gained 2.5% to top $111 a barrel.
Markets will have a shortened week, as the exchanges close Thursday for Thanksgiving Day and have an abbreviated trading day Friday.
Companies: Shares of Intel (INTC, Fortune 500) flipped between small gains and losses after the company said CEO Paul Otellini will retire in May. The board of directors will conduct a search for his successor.