NEW YORK - The stock market finally shook its post-election slump.
Investors seized on hope that Washington will reach a deal on the federal budget and drove stocks Monday to their biggest gain in two months. A pair of strong corporate earnings reports also helped.
The Dow Jones Industrial Average closed up 207.65 points, or 1.7 percent, to end at 12,795.96. The Standard & Poor's 500 index rose 27.01 points, or 2 percent, to 1,386.89. The Nasdaq composite average gained 62.94, or 2.2 percent, to 2,916.07.
Since President Barack Obama and a divided Congress were returned to power Nov. 6, the Dow had fallen six of eight days and a total of 650 points.
Obama and congressional leaders are in talks to avoid going over a "fiscal cliff" on Jan. 1, when tax increases and mandatory government spending cuts are set to take effect.
While Obama and Republicans appear at odds on whether tax rates for the wealthiest Americans should rise, lawmakers suggested over the weekend that progress is possible.
"It is quite clear that both sides want to come to a compromise and that a reasonable compromise is available," David Kelly, chief global strategist for J.P. Morgan Funds, wrote in a note to clients.
Corporate earnings reports also boosted the indexes. Lowe's said its third-quarter profit surged 76 percent. That followed a strong report from Home Depot last week. Lowe's rose $1.98, or 6.2 percent, to $33.96.
Tyson Foods, the country's biggest meat company, beat analysts' expectations for its quarterly earnings. Tyson added $1.84, or 10.9 percent, to $18.72.