U.S. stocks rise on Europe budget pact

A deal to forge stronger ties between most of Europe's economies sent stocks sharply higher Friday as hopes grew that the region is close to resolving its debt crisis. The Dow Jones industrial average rose 186 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 European Union nations are considering it. Britain is the lone holdout.

The agreement came after 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 will consider committing more money to lower borrowing costs of heavily indebted countries like Italy and Spain by buying their bonds.

Ryan Detrick, senior technical strategist with Schaffer's Investment Research, cautioned that investors have been disappointed by Europe's previous efforts to contain its debt crisis. "We've seen these agreements before, and they can just as easily deteriorate," Detrick said.

Moreover, he added, "The U.S. is showing definite signs of improving on the economic front, yet we almost ignore it, and every day we seem to focus on European issues."

The Dow closed up 186.56 points, or 1.55 percent, at 12,184.26. It's up 1.4 percent for the week.

Bank stocks led the market higher, reflecting traders' optimism about Europe's progress toward solving its crisis. Citigroup Inc. rose 3.7 percent, Morgan Stanley 3.2 percent and JPMorgan Chase & Co. 3 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 closed up 20.84 points, or 1.69 percent, at 1,255.19. The Nasdaq composite index finished up 50.47, or 1.94 percent, at 2,646.85. The S&P is up 0.9 percent for the week, the Nasdaq 0.8 percent. 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.