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U.S. stocks rose sharply as investors cheered a pledge from France and Germany to resolve the euro zone's banking and sovereign-debt troubles.

The Dow Jones Industrial Average rose 278 points, or 2.5%, to 11381. All 30 Dow components rose, with bank stocks leading the charge higher. Bank of America climbed 4.7% and J.P. Morgan Chase advanced 4.3%. The gains came after the blue-chip index managed a 190-point rally last week.

The Standard & Poor's 500-stock index gained 34 points, or 2.9%, to 1189. Each of the index's 10 sectors traded in positive territory, with energy, financial and material stocks posting the biggest gains. The technology-heavy Nasdaq Composite surged 76 points, or 3.1%, to 2555.

"There is a better tenor in the market," said Paul Nolte, managing director at Dearborn Partners. "The economic data recently has been a little bit better than expected, although not fabulous. The question is whether it's going to be enough to avoid a recession and get us going on a better growth path. The jury is still out on that."

Stocks have surged since tumbling into bear-market territory last week, broadly considered a decline of 20% from a recent peak. The S&P 500 has jumped 11% since hitting its most recent nadir on an intraday basis last Tuesday.

"The market was leaning heavily in one direction a week ago," said Michael Church, president of Addison Capital. "In some sense, it's not shocking to get an unwind of that wildly bearish scenario."

Monday's action followed gains in European markets. The Stoxx Europe 600 tacked on 1.7%, after German and French leaders said they would present measures to tackle the euro-zone banking and sovereign-debt crisis by month's end. They aim to recapitalize the banking sector where necessary and to strengthen the euro zone's rescue fund, the European Financial Stability Facility.

French President Nicolas Sarkozy and German Chancellor Angela Merkel said they were determined to have a "comprehensive package" by the end of October. Europe should have its problems resolved before the summit of the Group of 20 leading economies in France, on Nov. 3-4, Sarkozy said.

Still, the package outlined by the two leaders was sparse, suggesting that Europe's two top economies continue to dispute the plan's specific elements.

Investors also cheered news of a plan to address problems at the Franco-Belgian bank Dexia, which includes the nationalization of the Belgian unit and a EUR90 billion ($120.4 billion) funding guarantee for the next 10 years.

"Dexia blew up, but it didn't blow up the entire European financial system," said Charlie Smith, chief investment officer at Pittsburg-based Fort Pitt Capital Group. "Combine that with comments from Sarkozy and Merkel and people assume things are getting better. But I'd be leery of this move. I don't think there's a lot of strong underpinnings to this rally."

The third-quarter earnings season unofficially kicks off after Tuesday's closing bell, when Dow component Alcoa reveals results. The aluminum company's stock rose 3%. J.P. Morgan Chase and Google are among other well-known companies due to report quarterly results later this week.

The euro rallied sharply against the U.S. dollar, which also slipped against the yen. Gold futures rose above $1,675 an ounce. Crude-oil futures gained 2.9% and traded just above $85 a barrel.

U.S. bond markets are closed Monday for Columbus Day. The economic calendar is also bare. This week, investors will focus on a reading on the small-business sector, due Tuesday, as well as weekly initial claims for unemployment benefits on Thursday and September retail sales and October consumer sentiment on Friday.

In corporate news, Netflix said it will drop its plan to split its movie-streaming business and DVD-by-mail service into two separate websites, a move that had sparked an outcry among subscribers and sent its stock sharply lower. Shares dropped 2.1% after earlier rising nearly 10%.

Apple shares rose 3.9%. Preorders for the iPhone 4S topped one million in a single day, surpassing the previous single-day, preorder record of 600,000 set by the iPhone 4. Blue-chip telecom giant AT&T gained 1.9% after the company said it has seen "extraordinary" demand for Apple's new device.

Sprint dropped 11%, after falling 20% on Friday, as analysts expressed concern over the carrier's plans to roll out its own fourth-generation wireless network. Sprint signaled last week it may need to tap capital markets for a network upgrade and to help cover higher costs that are expected from offering Apple's iPhone.

Elsewhere, Yahoo rose 1.8% after Reuters reported co-founder and former CEO Jerry Yang is considering a deal to take the Internet company private.

Complete Production Services ran up 40% after the energy-services company agreed to be acquired by Superior Energy in a cash-and-stock deal. Superior Energy shed 14%.

-By Steven Russolillo, Dow Jones Newswires; 212-416-2180; steven.russolillo@dowjones.com

Complete Production Services Complete Production Services Common Stock (NYSE:CPX)
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