Stocks rose Monday, giving the S&P 500 its biggest advance in two months, amid better-than-forecast housing data and as President Barack Obama expressed confidence on a budget agreement with Congress.
The Dow Jones industrial average closed up 207.65, or 1.65%, at 12,795.96; the S&P 500 rose 27.01, or 1.99%, closing at 1,386.89; and the Nasdaq composite was up 62.94, or 2.21%, to close at 2,916.07. All numbers are preliminary.
Sales of previously owned U.S. homes climbed in October, indicating gains in the real estate market are being sustained by cheap borrowing costs. Confidence among U.S. homebuilders unexpectedly climbed in November to a six-year high, propelled by the biggest jump in sales in a decade, adding to signs the real estate market is improving.
Mr. Obama met with senior Democrats and Republicans on Nov. 16 for talks to avoid $607 billion of automatic tax increases and spending cuts that, if allowed to come into force, might push the country into a recession next year. House Speaker John Boehner, a Republican, described the budget discussions as constructive and said he would accept increased government revenue coupled with spending cuts. Congress is now in recess for Thanksgiving until Nov. 26.
“I am confident we can get our fiscal situation dealt with,” Mr. Obama said Sunday at a news conference in Bangkok, where he began a three-nation Asian trip.
The S&P 500 has gained an average 0.6% during the week of Thanksgiving, according to data since World War II compiled by Bloomberg. That compares with 0.15% in all calendar weeks in the same time frame.
Investors have seen $806 billion erased from the value of American equities since Mr. Obama was re-elected Nov. 6 in the biggest decline since May. The combination of falling stocks and rising profits as the economy recovers has left the S&P 500’s price-earnings ratio below the ending level of eight of the nine bull markets since 1962 and beneath the average of any since Ronald Reagan was in power.
Bears say the 4.8% drop in the S&P 500 and valuations show investors are losing confidence that Congress and Mr. Obama will reach a budget compromise that would keep the recovery from stalling.
Gold and oil rallied as a weaker dollar and concern about unrest in the Middle East increased demand for the commodities as alternative investments. Israel’s Defense Minister Ehud Barak said the army was prepared to invade the Gaza Strip for the first time in almost four years.