The Dow Jones industrial average (INDU) gained 1.6%, or 202 points -- its largest rise of 2011. Of its 30 components, 27 were in the black.
"Obama came on television and it seemed like there was significant progress on the debt ceiling," said Phil Streible, senior market strategist with Lind-Waldock. "Suddenly there was a lot of optimism."
The S&P 500 (SPX) added 21 points, or 1.6%; and the Nasdaq (COMP) gained 61 points, or 2.2%.
The nation could face default if lawmakers fail to raise the debt ceiling by the Aug. 2 deadline. The so-called "Gang of Six" proposal considered by senators earlier in the day plans to cut $3.7 trillion over the next ten years.
"The good news is that today a group of senators, the 'Gang of Six,' Democrats and Republicans... put forward a proposal that is broadly consistent with the approach that I've urged," the President said in an afternoon press conference.
Gold -- which had topped $1,600 an ounce earlier -- immediately plunged following Obama's comments. Gold futures for August delivery fell $15.40 to $1,587 an ounce in global trading.
Stocks were already up before Obama spoke, as investors welcomed a strong housing report and some solid corporate earnings.
Before the opening bell, the Commerce Department reported both housing starts and building permits figures that blew past Wall Street expectations in June.
The dollar weakened against the euro and British pound, but rose versus the Japanese yen.
Oil for August delivery gained $1.57 to $97.50 a barrel.
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