Why the Dow Rallied to 2-Month Highs

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It's a good day to be an investor today. The Dow Jones Industrial Average (DJINDICES: ^DJI  ) followed up on Monday's gains with a triple-digit session in the green today, closing up 115 points, or 0.9%, to reach highs not seen since October. Twenty-six out of 30 Dow stocks recorded gains, and even the index's laggards couldn't hurt the optimistic rally. Once more, it was the fiscal cliff in full focus during the run.

Washington sends shares up
Stocks shot higher today after House Republicans in Washington, led by Speaker John Boehner, announced  they would begin work on constructing a fiscal cliff deal that would preserve low taxes on individuals making incomes less than $1 million annually. While there's no certainty that such a deal can draw bipartisan support, it's nonetheless an important step toward compromise between Republican and Democratic leaders after the two parties have clashed over tax increases and spending cuts.

Wall Street certainly embraced the move today: Financials took the Dow higher, with Bank of America (NYSE: BAC  ) leading all stocks up as shares gained nearly 3.3%. B of A's been the best performer on the Dow this year, but its comeback from the depths of recession in building up capital positions and investor confidence  has strengthened the bank's climb. If the fiscal cliff is averted, B of A looks poised to capitalize on the rebounding housing market in a big way.

Fellow financials also picked up gains on the day, with JPMorgan Chase (NYSE: JPM  ) up 0.9% and shares of American Express (NYSE: AXP  ) gaining 1%.

Despite having less exposure to the fiscal cliff, tech stocks also had a strong day on the Dow. Shares of much-maligned Hewlett-Packard (NYSE: HPQ  ) rose more than 2.2%, giving shareholders a much-needed day of gains after the stock's three-month losses of more than 22%. Fellow stocks involved in the declining PC market also managed to record strong gains, with Microsoft (NASDAQ: MSFT  ) and Intel (NASDAQ: INTC  ) picking up 1.7% and 1.9%, respectively.

Few stocks saw losses on the day, but General Electric (NYSE: GE  ) managed to shave its heavy losses of earlier to end the day down just 1.1%. Fellow laggards include Coca-Cola (NYSE: KO  ) , which declined 0.6%, and Home Depot (NYSE: HD  ) , which fell 0.5% despite being well positioned to succeed in the surging housing market. Despite today's slight drop, however, shares of Home Depot are up more than 50% for the year.

Today's sessions have investors feeling good, but nobody's happier about the Dow's progress this year than Bank of America shareholders. With today's gains, the bank has gained more than 120% over the past 52 weeks -- but is there still time to get in on this hot stock's rally? To learn more about the most talked about bank out there, check out our in-depth company report on Bank of America. The report details Bank of America's prospects, including three reasons to buy and three reasons to sell. Just click here to get access.

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