Europe news spurs bank stocks up

A deal to forge stronger ties among most of Europe’s economies sent stocks sharply higher Friday as hopes grew that the region is close to resolving its debt crisis. The Dow Jones industrial average rose 186 points.

The Dow and S&P 500 both had their second straight week of gains. Financial stocks rose the most over the week as worries eased about Europe. The yield on the 10-year Treasury note rose back above 2 percent as investors shed low-risk investments.

All 17 nations that use the euro agreed to sign a treaty that allows a central European authority closer oversight of their budgets. Nine other EU nations are considering it. Britain is the lone holdout.

Bank stocks led the market higher, reflecting traders’ optimism about Europe’s progress toward solving its crisis. Citigroup Inc. rose 3.7 percent, Morgan Stanley 3.1 percent and JPMorgan Chase & Co. 3 percent.

Banks have been weighed down for months by fears about their exposure to Europe. The biggest European banks have been downgraded. If Europe’s crisis spins out of control, U.S. banks that do business with them would also suffer because of the closely intertwined relationships among global lenders and financial markets.

The gains were broad. DuPont was the only stock among the 30 in the Dow average to fall. The chemical and materials company slid 3.2 percent after saying it expects earnings this year will fall well short of Wall Street’s forecasts because of weak demand for electronics and industrial supplies.

Stocks were pummeled two weeks ago as borrowing costs soared for European nations. They recovered last week after the world’s major central banks announced a program to give commercial banks easier access to loans in U.S. dollars.

Both the Dow and the S&P have risen 14 percent since hitting yearly lows on Oct. 3. Only the Dow, however, is higher for the year. The Dow’s up 5.2 percent for 2011; the S&P and Nasdaq are each down 0.2 percent.