Stocks rose about 2 percent on Friday, with major indexes on track to end the week higher as Italy's Senate approved economic reforms, easing investor concerns about the euro zone's debt crisis.

Italian bond yields dropped after Italy's upper chamber approved economic reforms Friday. The package of austerity measures demanded by the European Union now goes to the lower house, which is expected to approve it Saturday.

Passage would trigger the resignation of Prime Minister Silvio Berlusconi, and former European Commissioner Mario Monti is widely expected to take over as head of a broadly based national unity government. European shares jumped more than 2 percent.

Once a new government is in place, markets will focus intently on whether Italy quickly and forcefully implements the budget deal, said Peter Boockvar, equity strategist at Miller Tabak + Co in New York.

The stakes cannot be higher, with the world's third largest bond market staring into the abyss.

In debt-loaded Greece, the prime minister designate, Lucas Papademos, a former vice president of the European Central Bank, will name a new crisis cabinet to roll out austerity plans.

The Dow Jones industrial average was up 275.71 points, or 2.32 percent, at 12,169.50. The Standard & Poor's 500 Index  was up 26.07 points, or 2.10 percent, at 1,265.76. The Nasdaq Composite Index  was up 51.17 points, or 1.95 percent, at 2,676.32.

Financial shares, seen as vulnerable because of their exposure to European debt, were among the best performers. Bank of America Corp rose 4 percent to $6.27, and JPMorgan Chase & Co gained 2.7 percent to $33.64. The KBW Bank index <.BKX> climbed 2.6 percent.

Walt Disney Co jumped 7.4 percent to $37.20 after the media and entertainment group reported a 7 percent gain in revenues and a 30 percent jump in profit, trumping expectations.

On the economic front, data showed U.S. consumer sentiment rose to its highest level in five months in early November as Americans felt better about the economic outlook.

(Reporting by Angela Moon; editing by Jeffrey Benkoe)