Bulls Charge: Dow Soars 1.2% on Debt Hopes, Earnings

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News that United States and European authorities were getting closer to tackling regional sovereign debt crises combined with rosy second-quarter earnings reports from several big-name companies sent the blue chips soaring more than 1% to the highest level since May.

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Today's Markets

The Dow Jones Industrial Average soared 153 points, or 1.2%, to 12,724, the S&P 500 rose 18 points, or 1.4%, to 1,344 and the Nasdaq Composite jumped 20.2 points, or 0.72%, to 2,834. The FOX 50 gained 11.1 points to 951.

French President Nicolas Sarkozy outlined a plan that would help stabilize the volatile Greek debt crisis that has captivated world  markets in recent weeks.  Greece, with its nearly $500 billion public debt load, which amounts to 150% of its economic output, has been on the brink of default and in need of a rescue.  Indeed, many analysts feared a default could cascade to larger European economies, such as Italy.

Under the plan outlined by Sarkozy, European lenders would create a fund that will lend to the embattled nation at between 3.5% to 4%, while private banks will lengthen maturity of their debt from Greece to 30 years.  Taken together, these steps will cut the country's public debt by roughly 24%. It is unclear whether ratings companies will consider the steps a so-called technical default, however.

The European Financial Stability Facility -- which was established in 2010 to aid during difficult times in bond markets -- will also be empowered to provide assistance in the European bond market when necessary.

News of a draft of this plan broke earlier in the day, sending European stock climbing. The euro also hit session highs, soaring 1.1%.

Earnings season is in full swing this week, with nearly half of all Dow components reporting quarterly profits.  Among them, AT&T (NYSE:T), Travelers (NYSE:TRV) and Microsoft (NASDAQ:MSFT) report on Thursday.

AT&T  revealed it earned 60 cents a share in the second quarter, topping expectations by a penny.  Travelers lost 91 cents a share, a far wider loss than the 64 cents analysts expected.  The insurer was hit hard by claims related to tornadoes that slammed the U.S.

Morgan Stanley unveiled a loss of 38 cents a share, better than the 62 cents Wall Street forecast.  Sales got a big boost in on the news.

Markets got a boost mid-day boost on a report by the New York Times that President Barack Obama and Speaker of the House John Boehner were close to a major deal on the U.S. debt ceiling.  However, both sides quickly denied the report, with Boehner tweeting "false" in response to the report.

Weekly claims for unemployment benefits rose to 418,000 from a revised 408,000 last week, according to the Labor Department, a higher number than the 410,000 economists had expected.

The labor market has been a major focus after the monthly unemployment report for June showed dismal job growth.  Additionally, claims have been stuck above the closely-watched 400,000-level for several weeks.

Manufacturing in the Philadelphia area increased more than expected  in July.  The Philadelphia Federal Reserve's survey of business conditions rose to 3.2 from -7.7 on the month, topping estimates of a reading of 2.  Readings above 0 indicate expansion, while those less than 0 point to contraction. A regional report by the New York Fed had come in below expectations earlier in the month.

Also on the corporate front, Express Scripts (NASDAQ:ESRX) said it plans on acquiring its rival Medco Health Solutions (NYSE:MHS) for $29.1 billion in cash and stock.

Energy markets were mixed despite a weakening dollar.  Light, sweet crude gained 73 cents, or 0.74%, to $99.13 a barrel. Wholesale RBOB gasoline tumbled 5 cents or 1.5%, to $3.10 a gallon.

Gasoline prices on the consumer level are once again making their way higher.  A gallon of regular at the pump costs $3.69 on average nationwide, up from $3.64 last month and well higher than the $2.72 drivers paid last year, according to the AAA Fuel Gauge report.

Gold fell $9.90, or 0.62%, to $1,587 a troy ounce.  Silver slid 61 cents, or 1.5%, to $38.95 a troy ounce.

Corporate News

Goldman Sachs (NYSE:GS) won dismissal of a suit that alleged the investment bank mislead investors in a certain collateralized debt obligation, 2007-1.

Foreign Markets 

The English FTSE 100 rose 0.79% to 5,900, the French CAC 40 jumped 1.7% to 3,817 and the German DAX climbed 0.95% to 7,290.

In Asia, the Japanese Nikkei 225 rose 0.04% to 10,010 and the Chinese Hang Seng edged lower by 0.07% to 21,987.

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