Stocks rose to their highest levels in more than two months on Friday in anticipation of a weekend European Union debt-crisis summit that could potentially remove a major cloud from markets.

Hurdles remain to resolving the crisis, and important differences still separate major players France and Germany, but investors apparently took it as a positive that their leaders have set a target date of Wednesday for reaching a solution.

Certainly, this Europe thing is affecting the market and the hopes of some resolution to it, said Terry Morris, senior equity manager for National Penn Investors Trust Company in Reading, Pennsylvania.

The possibilities of them coming up with some kind of solution is keeping the market up, is what has driven the market up over the past couple of weeks.

The Dow Jones industrial average gained 195.61 points, or 1.69 percent, to 11,737.39. The Standard & Poor's 500 Index gained 16.94 points, or 1.39 percent, to 1,232.33. The Nasdaq Composite Index gained 28.95 points, or 1.11 percent, to 2,627.57.

The benchmark S&P was on track for its third straight week of gains, the longest streak for the index since February.

Recent gains have pushed the S&P 500 to the top of its trading range between 1,230 and 1,250, where it has struggled to advance. Many investors are looking for progress in Europe before looking to earnings to push equities higher.

But equity markets have been susceptible to rapid and violent swings in recent weeks as traders latch on to varying headlines on Europe's debt crisis, leaving markets prone to volatility heading into the weekend.

On Friday, France's push to use more European Central Bank money to fight the euro zone debt crisis ran into strong resistance from Germany and other EU partners.

Consumer discretionary stocks were the best performing among S&P sectors after McDonald's Corp reported higher-than-expected quarterly profit, helped by new menu items in the United States and a tiered-price menu in Europe that includes premium and lower-priced selections.

Shares of the fast-food restaurant chain rose 2.7 percent to $91.41. The S&P consumer discretionary sector gained 2 percent.

Among industrial companies, Honeywell International Inc shares climbed 5.4 percent to $51.07 after it reported better-than-expected results and lifted its earnings outlook. The commercial aerospace company rose as much as 5.7 percent, its biggest gain since May 2010.

General Electric Co's third-quarter earnings rose, meeting Wall Street's estimate, driven by strong demand from Brazil, Russia and China. Its shares fell 2.4 percent as investors worried about declining profit margins at GE's energy equipment division.

The S&P industrials index advanced 1.2 percent.

According to Thomson Reuters data, of the 133 companies in the S&P 500 that have reported earnings through Friday, 68 percent have topped analysts' expectations.

(Editing by Padraic Cassidy)