Stocks rallied on Monday as investors bet that the U.S. will avert its fiscal impasse, giving major indexes their biggest one-day gains in more than two months.
The S&P 500 closed at 1,386.89, up 27.01 points, or 2 per cent. The blue-chip Dow Jones industrial average closed at 12,795.96, up 207.65 points, or 1.7 per cent. In Canada, the S&P/TSX composite index closed at 12,040.40, up 162.68 points, or 1.4 per cent.
The rally follows far more modest gains on Friday, when investors reacted to early indications that talks on the so-called fiscal cliff – or automatic tax increases and spending cuts should a budget agreement not be found – were going well. Meeting participants described the talks as “constructive.”
As well, the latest look at the U.S. housing market pointed to ongoing improvement. The National Association of Home Builders survey of builder confidence jumped to a five-year high of 46. Economists had been expecting a reading of 41.
Existing home sales rose 2.1 per cent in October, over September, and the inventory of unsold homes retreated to 5.4 months from 5.6 months in September – suggesting that the glut of homes is gradually decreasing.
The rally was broad, lifting all 30 stocks within the Dow and more than 92 per cent of stocks within the S&P 500. However, economically sensitive stocks showed some of the biggest gains.
Bank of America Corp. rose 4.1 per cent and Hewlett-Packard Co. rose 3.5 per cent. Apple Inc., which had seen its biggest selloff since the financial crisis, jumped 7.2 per cent.
Commodities also showed big gains. Crude oil rose to $89.28 (U.S.) a barrel, up $2.36. Gold rose to $1,734.40 an ounce, up $19.70.
Among Canadian commodity producers, Suncor Energy Inc. rose 3.3 per cent and Barrick Gold Corp. rose 1.2 per cent.