Stocks: Best day of year for S&P 500 as Europe talks unity

— -- Financial markets around the world stormed higher Friday after European leaders came up with a breakthrough plan to rescue banks, relieve debt-burdened governments and restore investor confidence.

The Dow Jones industrial average climbed 278 points, and the Standard & Poor's 500 index had its best day of the year. Stocks advanced even further in Europe, in strong and weak countries alike.

The price of oil posted its biggest one-day increase in more than three years, and other commodities shot higher — signs of hope that a deal in Europe will remove a big barrier to a healthier world economy.

In Brussels, leaders of the 17 countries that use the euro appeared finally to have found a broad strategy to fight a debt crisis that has hounded European governments and world investors for three years.

The leaders agreed to pump money directly into stricken banks, let some countries tap into rescue money without submitting to stringent budget requirements and, later, tie European governments closer in economic union.

David Kelly, chief global strategist at JPMorgan Funds, said it was becoming clear that European leaders will compromise to solve the crisis. One of the biggest stock gains Friday came in Germany, which took a hard line in earlier negotiations.

"The whole language is positive here," he said. "Every time they've stared over the cliff into the abyss of a euro breakup, they've realized it's much wiser to get closer together."

There was a sign immediately that Europe's latest plan was working: The cost for the troubled government of Spain to borrow money on the bond market fell dramatically, by more than half a percentage point, to 6.34%.

Previous market rallies tied to progress in Europe have proved temporary. But for the day, at least, global stock markets were jubilant:

• In New York, the Dow Jones industrial average closed up 277.83 points, its second-best showing this year. The S&P 500 index soared 33 points, or 2.5%. The rally left the S&P a gain of 8.3% at the halfway mark for the year.

• The benchmark stock index in Germany rose 4.3%, by far its best performance this year. Germany has the biggest economy in Europe, and it depends heavily on exports, so it needs other countries to stay healthy.

• Stocks hit their highest level in two months in Italy and Spain, two of the countries with the shakiest finances. Stocks also neared a two-month high in Greece, another flashpoint of the debt crisis.

Traders sold U.S. Treasuries, sending the yield on the 10-year Treasury note up to 1.65% from 1.57% late Thursday, as demand decreased for ultra-safe investments and investors raised money to buy stocks.

Energy prices rose sharply because a cure for Europe's debt problem would remove a big drag on global economic growth. The price of oil jumped $7.27 per barrel to $84.96. It was a gain of 9.4%, the biggest for oil since March 2009.

Seven of the 17 euro countries are in recession, and unemployment in euro countries is 11%. But if Europe gets its economy going, it will buy more goods and services from countries in Asia and the U.S.

Gold gained $54, the biggest jump since June 1, to $1,604 an ounce. Copper and silver both rose about 5%. Copper is a key material for economic expansion because of its use in electrical wiring, pipes and machinery.

The euro gained 2.3 cents against the dollar, to $1.2651.