French-German debt-deal news lifts stocks

Stocks rallied Tuesday on reports that Germany and France are moving closer to finding a fix for the European debt crisis.

The Guardian newspaper reported France and Germany have agreed to expand a rescue fund. European officials are expected to take up the expansion and a package of other steps at a meeting this weekend.

The Dow Jones industrial average rose 180.05 points, or 1.58 percent, to close at 11,577.05.

"The news out of Europe is taking fears of a 2008 scenario off the table," said Jeffrey Kleintop, chief market strategist at LPL Financial.

The worry hanging over markets for months is that a default by a deeply indebted European government could set off a financial crisis similar to the one triggered by the collapse of Lehman Brothers in 2008.

The Standard & Poor's 500 index rose 24.52 points, or 2.04 percent, to 1,225.38. The Nasdaq composite index rose 42.51 points, or 1.63 percent, to 2,657.43.

Banks and home builders also pulled the stock market higher Tuesday. Bank of America Corp. jumped 10.1 percent after it beat earnings expectations for the third quarter thanks to accounting gains and the sale of a stake in a Chinese bank.

Goldman Sachs rose 5.5 percent, even after reporting just its second quarterly loss since going public in 1999.

Markets wavered in early morning trading after some disappointing corporate earnings reports, and reports that France and Germany might not reach an agreement on additional support for Greece. An agreement between the two countries is seen as the bedrock for a rescue package that can pass all 17 countries that share the euro.