Stocks End Higher After New Greek Deal

Stocks closed sharply higher Thursday after EU leaders agreed on a final bailout package for Greece, in addition to an encouraging report on the Fed's mid-Atlantic manufacturing survey and some robust earnings reports.

The Dow Jones Industrial Average jumped 152.50 points, or 1.21 percent, to end at 12,724.41, led by BofA and Disney . Meanwhile, Intel was the only decliner. The blue-chip index is approximately 100 points away from the year's intraday high.

The S&P 500 climbed 17.96 points, or 1.35 percent, to finish at 1,343.80.

The tech-heavy Nasdaq rose 20.20 points, or 0.72 percent, to close at 2,834.43. All three major indices are now firmly in positive territory for the month.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, tumbled below 18.

All 10 key S&P sectors ended higher, led by financials and energy.

EU leaders agreed on a 109 billion euro rescue package for Greecethat could push the debt-ridden nation into a temporary default on some of its debt, but would also give Europe's bailout fund sweeping new powers to shore up struggling economies.

The euro rose to a two-week high against the U.S. dollar.

European banks including Barclays , Deutsche Bank and Banco Santander rallied sharply.

However, some strategists remained skeptical that the plan will put an end to the debt crisis.

“I'm negative on Europe—You have countries that have the biggest problems being subject to shrink monetary policy at a time they need more growth, so it’s a recipe for disaster,” according to Richard Campagna, managing director of 300 North Capital.

“What’s more likely is that you get another periodic blowups, or mini crises, every few months,” he added. “And this time, it’s going to center on Italy and Spain.”

Campagna said the market is going through a "mid-cycle slowdown."

"In the environment where the economy is slowing globally and where you have unresolved issues in U.S. and Europe, it’s only a matter of time before we see another one of these fear-induced crises that will take the markets back down," he said.

On the earnings front, AT&T gained after the telecom company posted a higher-than-expected revenue increase, as customers increased even after the firm lost exclusive U.S. rights to sell Apple's iPhone.

Morgan Stanley jumped after the financial giant reported a loss that was smaller than forecastsand revenue that beat expectations. However, S&P Equity cut its price target on the firm to $26 from $30.

The banking sector led the market for a second session, with firms such as Citigroup and BofA also higher.

Nokia advanced after the phone maker posted a better-than-expected quarterly profit.

Meanwhile, PepsiCo tumbled even after the beverage giant reported higher earnings.

And Travelers swung to a loss, as the property insurer suffered more than $1 billion due to the tornadoes in April and May.

On the tech front, Intel slipped after the Dow component lowered its outlook for the PC market on Wednesday afternoon. Meanwhile, analysts were mixed on the stock—Nomura reduced its price target from $23 to $18, while Barclays raised its price target to $26 from $25.

Shares of hard-drive maker Seagate Technology plunged sharply after Seagate's dismal report, which included a disappointing outlook. Rival Western Digital also tumbled.

Microsoft, AMD and Western Digital are slated to report earnings after-the-bell tonight.

On the M&A front, Express Scriptsagreed to buyrival Medco Health Solutions for $29.1 billion, combining two of the largest U.S. pharmacy benefit managers.

Volume was slightly better than usual with the consolidated tape of the NYSE at 4.21 billion shares, while 969 million shares changed hands on the floor.

Oil gained for a third session, lifted by a handful of upbeat economic news and reports that the IEA will not release more emergency stocks for now. U.S. light, sweet crude rose 73 cents to settle at $99.13 a barrel, while London Brent crude climbed above $118.

President Obama and House Speaker John Boehner are discussing a possible dealthat would include $3 trillion in spending cuts over 10 years to avert an unprecedented U.S. default, according to a senior Democratic congressional aide, and the potential agreement would include a promise of tax reform in 2012.

Earlier, stocks briefly spiked after the New York Times said Obama and Boehner were close to a major budget deal. However, the White House denied the report.

On the economic front, factory activity in the U.S. Mid-Atlantic region bounced back in July, but still remained at a weak level. Meanwhile, the Conference Board said leading economic indicator index rose in June.

Investors largely shrugged off a disappointing weekly jobless claims, which rose more than expected last week, according to the Labor Department, pointing to an employment market which continues to struggle. 

European shares closed at a two-week high after a draft document showed plans for a wide-ranging response to the sovereign debt crisis.

Coming Up This Week:

THURSDAY: Money supply; Earnings from Mircrosoft, AMD and SanDisk
FRIDAY: No major econ. news expected; Earnings from Caterpillar, GE, McDonald's, Schlumberger, Verizon, Honeywell

More on CNBC.com