Stocks held sharp gains across the board at the start of a holiday-shortened week amid signs of progress in Washington to resolve the "fiscal cliff" and following a pair of better-than-expected housing reports.
Major averages are on track to posting their biggest one-day gains since mid-September.
The Dow Jones Industrial Average jumped, led by Bank of America (BAC), after the blue-chip index logged its fourth-consecutive week in the red.
The S&P 500 and the Nasdaq also rallied more than 1 percent. The CBOE Volatility Index, widely considered the best gauge of fear in the market, traded below 16.
Most key S&P sectors were in positive territory, led by materials and telecoms. Utilities dipped into the red.
Congressional leaders voiced optimism last week about reaching a deficit-reduction deal to avert the "fiscal cliff" and expressed confidence they could reach a deal before Christmas. And over the weekend, President Barack Obama said he is "confident" the fiscal situation could be dealt with by lawmakers.
Meanwhile in Europe, euro zone finance ministers are expected to give a tentative approval for the disbursement of 44 billion euros in emergency loans to Greece on Tuesday, but the money will only be paid on Dec. 5 if the nation meets all remaining conditions, according to a report from Reuters. European shares added to gains following the report. And the euro rallied to session highs versus the U.S. greenback.
On the economic front, existing home sales unexpectedly rose 2.1 percent in October to a seasonally adjusted annual rate of 4.79 million units, according to the National Association of Realtors. Economists polled by Reuters had expected a reading of a 4.75 million-unit rate.
And the homebuilder sentiment gained for a seventh-straight month in November and hit its highest level, according to the National Association of Home Builders. The NAHB/Wells Fargo Housing Market index rose to 46. Economists polled by Reuters had expected the index would remain unchanged at 41.
Homebuilders including Toll Brothers (TOL), Beazer (BZH) and Pulte (PHM) rallied.
Intel (INTC) toggled in and out of negative territory after the tech giant announced that president and CEO Paul Otellini, has decided to retire in May.
Also among techs, Cisco (CSCO) edged higher after the tech bellwether said it will acquire privately-held cloud networking company Meraki in a deal worth $1.2 billion as part of its cloud and networking strategy.
Apple (AAPL) climbed 4 percent, rebounding after the iPad maker briefly touched a nine-month low last week. Still, shares are off more than 20 percent since hitting an all-time high in late September.
Citigroup (NYSE:C) will slash 300 jobs globally this year, according to the Wall Street Journal. Separately, the bank also agreed to pay $360 million to the brokerage estate of Lehman Brothers to resolve a dispute over $1 billion in collateral that the investment bank was forced to post in the days leading up to its bankruptcy in 2008.
Among earnings, Lowe's (LOW) jumped after the home-improvement retailer reported quarterly results and same-store sales that topped expectations.
Tyson Foods (TSN) soared nearly 10 percent to lead the S&P 500 gainers after the food producer exceeded earnings expectations and boosted its quarterly dividend.
Urban Outfitters (URBN) and Jack in the Box (JACK) are among companies slated to post earnings after the closing bell.
-By CNBC's JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
On Tap This Week:
TUESDAY: Housing starts, Richmond Fed's Lacker speaks, Bernanke speaks at the Econ. Club of New York, Kindle Fire HD w/4G LTE ships; Earnings from Hewlett-Packard, Best Buy, Campbell Soup, Chico's, Salesforce.com
WEDNESDAY: Weekly mortgage applications, jobless claims, PMI manufacturing index flash, consumer sentiment, leading indicators, oil inventories; Earnings from Deere
THURSDAY: Happy Thanksgiving! - Markets closed
FRIDAY: Black Friday - NYSE closes at 1pm ET / CME closes at 1:15pm ET
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