Stocks rallied Monday, ending a volatile year on a high note, as investors welcomed signs a fiscal cliff deal is taking shape in Washington.
On the final day of 2012, the Dow Jones Industrial average rose 1.3%, or more than 167 points. The S&P 500 added 1.7%. The Nasdaq rose 2%, with shares of Apple gaining 4.6%.
The advance came on light volume, since many professional investors are away from their desks for the holidays, traders said. While an official agreement has yet to be announced, investors were relieved to see signs that lawmakers were moving forward toward reaching an agreement to prevent tax hikes and spending cuts from taking effect Jan. 1.
"Investors were expecting the worst, so anything positive coming out of Washington is greeted with buying," said Jack Ablin, chief investment officer at Harris Private Bank.
Obama said an agreement to prevent taxes from going up on middle-class households "is within sight, but it's not done."
"There are still issues left to resolve, but we are hopeful that Congress can get it done," the president told a gathering of "folks" at the White House.
Obama chided lawmakers for waiting until the last possible minute, acknowledging that he will not be leaving town for the New Year holiday. "It looks like I will be spending New Year's here, in D.C.," he said.
Congress appears to be near an agreement to raise the income tax rate on top earners to what it was during President Bill Clinton's last term in office, according to sources close to the process.
The deal would also increase estate taxes, extend unemployment benefits and potentially put off the $110 billion in automatic spending cuts called for under the fiscal cliff, sources told CNN.
The proposal, assuming lawmakers in both chambers approve it, would prevent the full force of the fiscal cliff from hitting the economy. But it does not address the long-term fiscal problems facing the country and will not resolve the uncertainty hanging over the market, said Ron Florance, managing director of investment strategy at Wells Fargo Private Bank.