World stocks jumped and the euro also rose on Monday as optimism grew that European leaders were readying a plan to resolve the region's debt crisis.
Traders were sceptical, nonetheless, and headlines dismissing the plan could reverse the trade, which also sent U.S. Treasury bonds and the dollar lower.
Germany and France pushed to acquire powers to reject national budgets in the euro zone that breach European Union rules ahead of an EU summit on December 9.
Fiscal union could spare the euro zone falling into another sovereign debt crisis like the one it is experiencing and that threatens to pull the region back into recession.
Still, plans seem to be focussing on triple-A rated euro zone sovereigns, leaving Italy and Spain largely outside the fold.
It looks like we're seeing progress in the euro zone, and if that leads to a more stable Europe, the S&P could move back to at least 1,300, said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co in San Francisco.
Additional hope for a resolution was seen as an Italian newspaper suggested the International Monetary Fund was preparing a rescue plan for Italy, although an IMF spokesperson denied the report.
With less than half an hour of trading left in New York, the Dow Jones industrial average <.DJI> was up 244.20 points, or 2.17 percent, at 11,475.98. The Standard & Poor's 500 Index <.SPX> was up 27.88 points, or 2.41 percent, at 1,186.55. The Nasdaq Composite Index <.IXIC> was up 72.42 points, or 2.97 percent, at 2,513.93.
After seven straight sessions of losses that dragged the index to a 7-week low, the S&P 500 posted its best day in a month.
Retail stocks soared in the United States after stores racked up record sales over the Thanksgiving weekend.
The MSCI world equity index jumped 2.8 percent. The index is down roughly 13 percent year-to-date and about 20 percent since hitting a three-year high in May.
The bet on Europe's ability to contain its debt crisis coupled with a strong start to U.S. holiday sales also helped lift crude oil prices.
ICE Brent January crude rose 2 percent and U.S. January crude added 1 percent.
Copper prices jumped 2.8 percent, though gains were seen vulnerable ahead of next week's European summit.
In the foreign exchange market, the euro added 0.5 percent to $1.3305, having climbed to almost $1.3400.
We have had bouts of optimism several times in the past year and they ended in tears, said Steven Englander, head of G10 strategy at CitiFX, a division of Citigroup, in New York.
There has been a more active discussion about how to handle the debt crisis than there was a month ago, but upcoming events will be key to whether this wave of optimism is sustainable.
Any push for EU treaty changes needed for the creation of broader fiscal union could face strong opposition by various euro zone and EU countries. This could mean ECB support for weaker euro zone bond markets may not be as forthcoming as some hope.
Declines in safe-haven U.S. Treasury prices could be short-lived after a warning by Moody's that the rapid escalation of the region's sovereign and banking crisis threatens the rating of all European government bonds.
The benchmark 10-year U.S. Treasury note was down 2/32, the yield at 1.9722 percent.
(Reporting by Rodrigo Campos; additional reporting by Julie Haviv and Ryan Vlastelica; Editing by Dan Grebler)