Stocks ended near session highs in choppy trading Monday, with the Dow and S&P 500 closing in positive territory for the fourth-straight session, as investors remained encouraged by signs of progress in the budget deal.
The Dow Jones Industrial Average gained 64.15 points, to end at 15,301.26, lifted by Pfizer and Boeing.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, finished near 16.
The Russell 2000 small cap index rallied to briefly hit a fresh high.
Among key S&P sectors, techs and energy led the gainers, while utilities sagged.
Major averages rallied last week amid hopes for a deal. The Dow and S&P closed in the black for the week and all three indexes logged their second-best gains for the year on Thursday.
Stocks briefly pared their gains after an announcement that the meeting between President Obama and Congressional leaders was postponed. The meeting, originally scheduled for 3pm ET, was pushed back to allow leaders in the Senate "time to continue making progress" towards a solution that raises the debt limit and reopens the government, according to a statement from the White House.
Stocks initially opened lower after weekend talks between lawmakers to strike a deal were unsuccessful but soon erased their losses after Senate Democratic Leader Harry Reid said he hopes to have a fiscal plan to present to President Obama at the White House meeting later today, adding he is "very optimistic" that Senate leaders will reach a deal.
President Obama's comments also added fuel to the earlier rally after he noted signs of progress in Senate fiscal impasse negotiations.
"My hope is that a spirit of cooperation will move us forward in the next few hours," he said.
The U.S. government needs to raise the debt ceiling before Oct. 17 in order to avoid a potential default on its debt — the Treasury needs to make a Social Security payment of around $24 billion on Nov. 1.
(Read more: Senate leaders talk; GOP blames Obama for gridlock)
The U.S. bond market was closed Monday in observance of Columbus Day.
As global concerns over the possibility of a default grew, the chief of the International Monetary Fund, Christine Lagarde, said the situation was "very, very concerning" and warned that "creative accounting" was not the right solution.
The shutdown has furloughed nearly 350,000 federal workers, impeded various government services, put continued operations of the federal courts in doubt and stopped the IRS from processing tax refunds.
(Read more: As shutdown drags on, is more global easing coming?)
Netflix rallied to lead the S&P 500 gainers after the Wall Street Journal reported the company is in talks with several U.S. cable television companies to make its streaming video service available through set-top boxes.
Expedia tumbled sharply after Deutsche Bank cut its rating on the online travel agency to "hold" from "buy."
Facebook edged lower after the social-networking giant said it would acquire start-up app-maker Onavo. Financial terms of the were not immediately disclosed.
Several major companies are slated to post earnings results this week including Citigroup, Coca-Cola, Bank of America, IBM, Goldman Sachs, GE and Morgan Stanley. (See below for full earnings calendar)
S&P 500 companies are expected to post earnings growth of 4.2 percent in the quarter, down from the 8.5 percent rate that had been forecast on July 1, according to the latest data from Thomson Reuters data. Of the 31 S&P components that have reported so far, about 55 percent have topped expectations, below the historical average of 63 percent.
Japan and Hong Kong were shut for public holidays in Asia. China's Shanghai Composite extended last week's 2.5 percent gain, on the news that annual consumer inflation rose to a seven-month high in September. However, gains were pared by weekend data that showed a surprise 0.3 percent drop in exports in the same month.
(Read more: Why Chinese actually envy the US shutdown)
—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
Coming Up This Week:
TUESDAY: Empire state mfg survye, IRS deadline, Wal-Mart Investor mtg; Earnings from Citigroup, Coca-Cola, J&J, Intel, Yahoo, CSX
WEDNESDAY: Mortgage applications, CPI*, Treasury int'l capital, housing market index, Beige Book; Earnings from Bank of America, BlackRock, PepsiCo, US Bancorp, American Express, Ebay, IBM
THURSDAY: Fed's Fisher speaks, jobless claims, housing starts*, industrial production*, Philadelphia Fed survey, natural gas inventories*, oil inventories*, Fed's Kocherlakota speaks, Fed's balance sheet/money supply, US debt ceiling deadline, Windows 8.1 available, Dell annual shareholder mtg; Earnings from Goldman Sachs, Verizon, Google, Capital One, Chipotle Mexican Grill
FRIDAY: Leading indicators; Earnings from General Electric, Schlumberger, Morgan Stanley, Honeywell
*Data will not be released due to the government shutdown.
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