Stocks rose broadly in early trading Monday on hopes for a plan to restore long-term confidence in the euro.
A crucial week for the shared currency began Monday with a gathering of French and German leaders. French President Nicolas Sarkozy and German Chancellor Angela Merkel met in Paris to discuss forging closer political and economic ties between the 17 nations that use the euro. They want tighter control of member nation's budgets, to prevent the kinds of mounting debts that might cause Greece, Italy and others to default.
The yields on Italian bonds dove to their lowest level in a month, suggesting traders believe that Italy is less likely to default. Italy's government agreed this weekend on a package of austerity and economic growth measures.
The Dow Jones industrial average rose 139 points, or 1.2 percent, to 12,158 about 15 minutes after the market opened. The Standard & Poor's 500 index rose 16, or 1.3 percent, to 1,261. The Nasdaq composite index gained 27, or 1 percent, to 2.654.
The gains were broad, lifting all 30 stocks in the Dow and all 10 industry groups in the S&P 500.
Financials stocks were among the biggest winners. Investors have feared that U.S. banks might be dragged down by their close connections to the unstable European financial system.
JPMorgan Chase & Co. jumped 4.5 percent, the most in the Dow. Bank of America was the second-biggest gainer of the Dow 30, rising 3.6 percent. Morgan Stanley and Citigroup Inc. both rose 6.1 percent.
In Europe, the Britain's FTSE 100 rose 0.7, Germany's DAX 1.2 percent. The biggest gainer was Italy's FTSE MIB, which was trading 3.1 percent higher, a day after the government led by Premier Mario Monti agreed big austerity and growth-boosting measures.
Sarkozy is resisting giving up more powers to Brussels in part because he faces a tough re-election campaign in April. Sarkozy is thought to prefer an intergovernmental deal between the 17 euro countries.
The markets are hopeful that, given the gravity of the situation afflicting the euro zone, the two leaders will come up with a common proposal for tighter integration on budget matters. Analysts say that such a plan could lead to further emergency aid from the European Central Bank, possibly through the International Monetary Fund.
Italy's borrowing costs pulled back from a level that might have forced the nation to default. Analysts say bailing out Italy would be too costly and would hurt the credit standing of German and France, which have the strongest economies in the euro group.
The yield on the 10-year Italian bond plunged half a percentage point to 5.99 percent. It rose above 7 percent in November, a level at which other nations were forced to take bailouts. By comparison, bond yields in Germany, Europe's largest and most stable economy, are roughly 2 percent.
The euro rose 0.3 percent to $1.3468. Crude oil rose 98 cents a barrel to $101.96 in New York.
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