The broad indexes all saw 2% gains, after The National Association of Realtors reported that sales of existing homes increased in October by 2.1% to a seasonally adjusted annual rate of 4.79 million, from a downwardly revised 4.69 million in September.
October existing home sales were 10.9% above the annual rate of 4.32 million-unit level in October 2011. Economists, on average had expected an annual rate of 4.75 million existing home sales in October, according to Briefing.com.
Investors continued to anticipate a deal between leaders of Congress and President Obama to avert the "fiscal cliff," an its combination of an expiration of tax cuts that were enacted when George W. Bush was president and extended in 2010 by President Obama, as part of a deal with Republicans to raise the federal debt ceiling. Without a new deal, many economists believe that the tax increases and concurrent required cuts in federal spending cut push the U.S. economy back into recession.KBW economist Maury Harris early on Monday wrote that "among recently polled economists, 84%--including ourselves--expect a deal. However, only 38% of polled adults anticipate an agreement, with that sentiment being echoed in a very worried stock market." Harris added that even some of the big government spenders are worried: "Meanwhile, in Washington DC, the Defense Department is apparently taking no chances and is feverishly spending funds before they possibly become sequestered." Then again, Harris indicated that the Federal Reserve could see quite a boost to its suffering credibility in the event that there is no deal to resolve the fiscal cliff, because "tighter fiscal policy might become a positive, not just for the positive impact on the deficit, but also because it could allow the Fed to become the first central bank to successfully." the KBW Bank Index (I:BKX) rose over 2% to close at 48.20, with all 24 index components showing gains. Banks with fortunes closely tied to the housing market showed gains of nearly 4%, including Bank of America (BAC - Get Report), which closed at $9.49, and SunTrust (STI - Get Report), closing at $26.99.