A deal to forge stronger ties between most of Europe's economies sent stocks sharply higher Friday afternoon as hopes grew that the region is close to resolving its debt crisis. The Dow Jones industrial average rose 215 points.
All 17 nations that use the euro agreed to sign a treaty that allows a central European authority closer oversight of their budgets. Nine other EU nations are considering it. Britain is the lone holdout.
The agreement came in marathon overnight talks among European leaders at a two-day summit in Brussels. A deal on tighter fiscal control is considered a crucial step before the European Central Bank commits more money to lowering borrowing costs of heavily indebted countries like Italy and Spain.
Ryan Detrick, senior technical strategist with Schaffer's Investment Research, cautioned that investors have been disappointed before with earlier efforts by Europe to contain its debt crisis.
Detrick said the market will likely remain volatile in the coming weeks because the Europe plan is "only a minor step" toward a solution. "We've seen these agreements before, and they can just as easily deteriorate."
The Dow rose 215 points, or 1.8 percent, to 12,212 at 3 p.m. Eastern time.
Bank stocks led the market higher, reflecting traders' optimism about Europe's progress toward solving its crisis. Citigroup Inc. rose 4 percent, Morgan Stanley 3.7 percent and State Street Corp. 2.8 percent.
Banks have been weighed down for months by fears about their exposure to Europe. The biggest European banks have been downgraded. If Europe's crisis spins out of control, U.S. banks that do business with them would also suffer.
The Standard & Poor's 500 index rose 24 points, or 1.9 percent, to 1,258. The Nasdaq composite index added 56, or 2.2 percent, to 2,652.
The gains were broad. DuPont was the only stock among the 30 in the Dow average to fall. The chemical and materials company slid 2.4 percent after saying it expects earnings this year will fall well short of Wall Street's forecasts because of weak demand for electronics and industrial supplies.
All three major indexes are on track to close higher for the second straight week. Stocks were pummeled two weeks ago as borrowing costs soared for European nations such as Italy. They recovered last week, mainly because the world's leading central banks announced a program to give banks easier access to loans in U.S. dollars.
Both the Dow and the S&P have risen 14 percent since hitting yearly lows on Oct. 3. Only the Dow, however, is higher for the year.
The yield on the 10-year Treasury note rose to 2.06 percent from 1.97 percent late Thursday, signaling lower demand for ultra-safe investments. The rise followed news that a survey of U.S. consumer sentiment hit a six-month high this month, better than Wall Street expected.
Many think the only path out of the debt crisis is a more active role by the European Central Bank, which could buy up more government debt to keep nations' borrowing costs down. It currently buys bonds in the markets, but only reluctantly, and in small quantities.
Stocks fell sharply on Thursday after the ECB indicated that it didn't have an immediate plan to expand its bond-buying program. The Dow closed 199 points lower.
European indexes rose after U.S. markets opened higher. Germany's DAX closed 1.9 percent higher, France's CAC 40 rose 2.5 percent and Italy's FTSE MIB soared 3.4 percent.
Germany and France, the two biggest economies in the euro zone, had hoped to persuade all 27 members of the European Union to change an EU treaty and impose tight fiscal rules on its members. Britain refused to join in because it wanted to be exempt from proposed financial rules.
Among other companies making big moves:
— Pall Corp. surged 8.5 percent after the filtration equipment maker reported fiscal first-quarter earnings that far exceeded analysts' expectations.
— The Cooper Cos. Inc. leaped nearly 16.8 percent after the eye care company topped expectations with its fiscal fourth-quarter performance.
— Texas Instruments Inc. edged lower after the semiconductor maker said the weak global economy has hurt demand for electronic devices that use its chips.
— General Electric Co. rose 3.3 percent after the manufacturing giant said it will increase its quarterly dividend by 2 cents to 17 cent per share, GE's fourth increase in two years.