Stocks jumped to a fresh two-year intraday high on Tuesday as investors bet that a deal to extend tax breaks will prompt increased spending and buoy the economy.

A stronger euro, rising commodity prices and an acquisition in the energy sector also combined to push Wall Street higher.

U.S. President Barack Obama announced the deal to renew Bush-era tax cuts for wealthier Americans -- as Republicans had wanted -- as well as the middle class. The deal was expected to extend breaks on dividends and capital gains.

Investors have said the tax cuts were necessary to keep the fragile economic recovery on track and could lead to more spending and investing. Keeping the capital gains tax steady could make investors less inclined to sell shares.

This is tantamount to another stimulus plan, said Joseph Battipaglia, market strategist at Stifel Nicolaus in Yardley, Pennsylvania.

That's going to add to GDP, which will then add to consumption and will in turn support the profit picture.

The Dow Jones industrial average <.DJI> rose 84.88 points, or 0.75 percent, to 11,447.07. The Standard & Poor's 500 Index <.SPX> gained 11.31 points, or 0.92 percent, to 1,234.43. The Nasdaq Composite Index <.IXIC> advanced 24.48 points, or 0.94 percent, to 2,619.40.

The S&P 500 rose to a fresh two-year high and hit a new intraday high for 2010. The index also broke above the 61.8 percent Fibonacci retracement of the 2007-2009 bear market slide, a key technical indicator that had been seen as a strong resistance point.

Nicor Inc climbed 5.1 percent to $49.16 after natural gas distributor AGL Resources Inc agreed to buy Nicor, a peer. AGL shed 4 percent to $35.65.

The energy sector led the broad rally, with the S&P energy index <.GSPE> up 0.5 percent. Oil futures trimmed gains after climbing above $90 a barrel for the first time in 26 months. Chevron Corp was up 1.4 percent at $86.11.

(Additional reporting by Caroline Valetkevitch; editing by Jeffrey Benkoe)