Stocks closed higher Tuesday but off their best levels after traders remained skeptical over a report that France and Germany have agreed to increase EU bailout fund, calling the news "nothing new."
The Dow Jones Industrial Average jumped 180.05 points, or 1.58 percent, to close at 11,577.05, led by BofA and JPMorgan . IBM was the biggest laggard on the blue-chip index.
The S&P 500 rallied 24.52 points, or 2.04 percent, to finish at 1,225.38. The Nasdaq gained 42.51 points, or 1.63 percent to end at 2,657.43.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, finished near 32.
All 10 S&P sectors finished in the black, led by banks and energy.
France and Germany reached an agreement to increase the euro zone's bailout fund to 2 trillion euros as part of a plan to ease the debt crisis and to calm market uncertainties, reported The Guardian, citing EU diplomats.
The agreement comes ahead of a key crisis summit this weekend and on the heels of a possible downgrade on France's AAA-rating by Moody's.
“This news is nothing really new. I’m tired of headlines coming out in the final hour,” said Joe Saluzzi, co-manager of trading at Themis Trading. “Is this news even fixing anything and is it sustainable? Maybe to the close, but until tomorrow, who knows? Unfortunately, this market is still very headline driven.”
Meanwhile, Bank of America surged after the financial giant posted a profit, though the firm's main businesses showed signs of weakness as lending profit fell and expenses rose. Meanwhile, rival Goldman Sachs posted its second quarterly loss as a public company as its investment sank and trading revenue tumbled. However, shares rallied as the firm's loss was far less worrisomethat initially appeared.
Also among banks, Citigroup gained even after at least three brokerages cut their price target on the banking giant.
IBM slumped after the tech giant's revenue barely met forecasts, underscoring fears over slower IT spending. The company still beat earnings expectation and increased its 2011 EPS outlook. Analysts were mixed on the stock. BofA Merrill Lynch raised its price target on the firm to $205 from $190, while BMO slashed its rating to "market perform" from "outperform."