Euro deal would centralize oversight over European Union nations' budgets. The euro deal boosted the Dow 173 points in midday trading, but Britain is a holdout and euro agreements in the past have ultimately disappointed investors.
A deal to forge stronger ties between most of Europe's economies sent stocks sharply higher at midday Friday as hopes grew that the region is close to resolving its debt crisis. The Dow Jones industrial average rose 173 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 173 points, or 1.4 percent, to 12,170 shortly after noon Eastern time.
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 will suffer.
The gains were broad. DuPont was the only stock among the 30 in the Dow average to fall. The chemical and materials company slumped 4.6 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.
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. With Friday's gains, all three major U.S. stock indexes are positive for the week.
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 9.4 percent after the filtration equipment maker reported fiscal first-quarter earnings that far exceeded analysts' expectations.
— The Cooper Cos. Inc. leaped 19 percent after the eye care company topped expectations with its fiscal fourth-quarter performance.
— Texas Instruments Inc. fell 1.8 percent after the semiconductor maker said the weak global economy has hurt demand for electronic devices that use its chips.