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Stocks Heat Up as Budget Talks Progress


NEW YORK ( TheStreet) -- Major U.S. equity averages heated up Monday as investors cheered signs that Washington officials were making noteworthy progress in their efforts to try to avert the so-called fiscal cliff.

Republican House Speaker John Boehner seems to be in the process of yielding to some of President Barack Obama's main demands, including higher tax rates for wealthy Americans, as both sides work to avoid falling over the cliff's $600 billion in automatic tax hikes and spending cuts at the end of the year. Boehner has suggested an increase in taxes on Americans with incomes exceeding $1 million.

The Dow Jones Industrial Average rose 100 points, or 0.76%, to 13,235. The blue-chip index began the session up 7.8% this year.

Winners outnumbered losers 26 to three. The biggest percentage blue-chip gainers were Bank of America (BAC) , Home Depot (HD) , General Electric (GE) and JPMorgan Chase (JPM) .

Wal-Mart (WMT) shares finished up 0.65% as the retail giant lowered prices on Apple products for the holiday season.

Cisco (CSCO) shares also edged higher, up 1.3%, as the networking giant hired Barclays to find a buyer for router business Linksys, Bloomberg reported, citing people with knowledge of the situation. Linksys is likely to fetch less than the $500 million Cisco paid for it in 2003 because it is a mature consumer business with narrow margins, the people told Bloomberg.

Laggards in the Dow included Hewlett-Packard (HPQ) , Coca-Cola (KO) and Verizon (VZ) .

The S&P 500 tacked on 17 points, or 1.2%, to 1,430. The Nasdaq added 39 points, or 1.3%, to 3,011.

Most sectors in the broad market were in positive territory, led higher by financials, consumer cyclicals, utilities and capital goods.

Volumes reached 3.42 billion shares on the New York Stock Exchange and 1.90 billion shares on the Nasdaq. Advancers outpaced decliners 2-to-1 on the Big Board and 2.2-to-1 on the Nasdaq.

"We persist in projecting a successful avoidance of the fiscal cliff," said John Stoltzfus, chief market strategist at Oppenheimer and Co. That's because it's mostly in everyone's interest "to avert an unwelcome ride that could send a domestic and global economic recovery process into recession."

Michala Marcussen, global head of economics at Societe Generale, said it's apparent that a lot of work still needs to be done to resolve the U.S. budget.

While Boehner's tax proposal is a positive development, it's still a much higher level of income than the $250,000 proposed by the Obama camp and would leave a "gaping" hole in reaching Obama's $1.4 trillion revenue target, Marcussen said.

Therefore, "the divide between the two camps still remains significant," she said.

Craig Johnson, senior technical research analyst at Piper Jaffray, said the resolution of the U.S. budget talks could result in a retest of the key overhead resistance at 1,550 on the S&P 500.