NEW YORK ( TheStreet) -- The major U.S. stock averages soared Monday as positive housing market data gave extra mileage to a rally fueled by optimism over budget talks in Washington.

Upbeat earnings reports from Lowe's ( LOW) and Tyson Foods ( TSN) also boosted investor confidence after last week's deep pullback. The surge occurred despite rising tensions in the Middle East as Israeli and Palestinian forces continued to exchange rocket fire in the Gaza Strip area.

The Dow Jones Industrial Average spiked higher by nearly 208 points, or 1.65%, to close at 12,796. The blue-chip index, which has lost ground in five of the past six weeks, is now up 4.7% so far in 2012.

All thirty of the Dow's components finished in the green. Even Intel ( INTC), which was in negative territory for much of the session after surprising Wall Street with news that Paul Otellini plans to retire from the chip giant's chief executive officer in May, managed a slight gain.

The biggest blue-chip winners were Bank of America ( BAC), Hewlett-Packard ( HPQ), JPMorgan Chase ( JPM), and Verizon ( VZ).

The S&P 500 gained 27 points, or 1.99%, to close at 1387, while the Nasdaq climbed 63 points, or 2.21%, to settle at 2916.

Every sector in the broad market was higher with basic materials, capital goods, consumer cyclicals, energy, technology, and transportation all rising more than 2%.

Advancers outpaced decliners by about a ratio of 7.8-to-1 on the New York Stock Exchange and 3.7-to-1 on the Nasdaq. Volume totaled 3.36 billion on the Big Board and 1.77 billion on the Nasdaq.

U.S. budget discussions are expected to continue behind the scenes in Washington this week as President Barack Obama makes his tour through Asia. The president has provided reassurances that a U.S. budget agreement will be reached on time.

"Attention remains centered on the fiscal cliff," said Michala Marcussen, global head of economics at Societe Generale. "Recent developments give grounds for some cautious optimism, but history suggests that politics can be notoriously fickle. Our base case remains that a temporary extension is voted before year-end with a final agreement in early 2013. This will lift uncertainty and remove a significant headwind to recovery."

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