Stocks staged a relief rally Wednesday amid talks of a bailout for Greece and positive earnings and sales news from some key Dow components.
Gains accelerated around noon after the Greece reports gained even more traction from European Union leaders who said the group should help the nation in return for budgetary reforms.
Energy and materials were the leading sector gainers on the S&P, each registering gains of more than 2 percent. Defensive stocks trailed, with consumer staples and health care lagging as risk returned to the markets. Airlines also took off.
Gains also were limted just a bit on the technology side after Electronic Arts disappointed investors Monday with earnings expectations that trailed forecasts. The bad news carried into today's trading and sent the company's shares down nearly 10 percent to be the biggest drag on the Nasdaq.
The rally also ran into a brief stumbling block after bank stocks fell on a downgrade from Standard & Poor's, but the market returned to gains across the board of more than 1 percent.
Bank of America briefly fell nearly 1 percent after S&P cut its rating for BofA and Citigroup on worries that a second bailout of the banks would leave bond holders dry. Both stocks quickly turned positive.
In earnings news, Dow component Coca-Cola posted a profit of 66 cents a share, in line with estimates and enough to send its shares up.
Fellow Dow component Caterpillar saw its shares climb on an upgrade from Morgan Stanley. The stock led the bluechip index.
McDonald's shares gained after the company reported a 2.6 percent gain in global monthly sales but sluggish US growth for January.
All 30 Dow components were trading in positive territory.
The dollar weakened against the euro, giving a lift to commodities as oil climbed past $72 a barrel.
The Dow US Airlines Index surged more than 5 percent with American Airlines parent AMR jumping more than 9 percent. Japan Airlines decided to maintain its partnership with American after considering a possible tie-up with DeltaAir Lines. United Airlines parent UAL was the top percentage gainer in the group and on the Nasdaq.
The Dow US Toys index was one of the few on the board in negative numbers.
Elsewhere, Toyota announced the long-rumored recall of 437,000 Prius and other hybrid models to fix a braking problem. Toyota shares have rallied about 3 percent overseas this morning, but they're still about 20 percent below where they were when the latest recall crisis began in late January.
PetSmart also was benefiting from an analyst upgrade as Credit Suisse upped the company to "outperform" from "neutral."
The market rally was undeterred by a report showing that inventories fell 0.8 percent and sales rose 0.8 percent—both of which missed analyst expectations.
The Treasury will auction $40 billion in 3-Year notes today, with the results available shortly after 1 pm. That will be followed by the sale of $25 billion in 10-Year notes tomorrow, and $16 billion in 30-Year bonds on Thursday.
In other earnings, Pulte Homes reported a smaller loss and said excluding items the builder operated at breakeven for the quarter. But the profit missed analyst expectations and the stock fell, as did shares of other builders.
After this afternoon's closing bell, Dow component Walt Disney will be out with its quarterly numbers.
Nearly 500 million shares changed hands by noon on the New York Stock Exchange. Breadth was strongly positive as gainers beat losers nearly 3.5 to 1.
TUESDAY: Wholesale trade; 3-year note auction; Earnings from Coke, UBS, IAC, Pulte Homes and Disney; Mac World starts (through Sat)
WEDNESDAY: Weekly mortgage applications; trade balance; Google hearing; weekly crude inventories; Fed's Plosser speaks; 1o-year auction; Earnings from NYT, Sprint Nextedol, Boston Scientific and Prudential; Chicago auto show starts
THURSDAY: Retail sales; weekly jobless claims; 30-year auction; Earnings from Pepsi, Philip Morris, and Viacom; Fashion week starts; Miami boat show starts
FRIDAY: Consumer sentiment; Winter Olympics starts