Stocks rose strongly Tuesday on signs that Europe's debt markets remain resilient and China's economic slowdown has been gradual.
The Standard & Poor's 500 index topped 1,300 for the first time since July, before the European debt crisis set off months of shocking volatility.
Debt auctions by Spain, Greece and Europe's bailout fund drew solid interest from investors Tuesday, easing fears that recent credit-rating downgrades would prevent them from obtaining funds. The downgrades had threatened to increase borrowing costs and intensify the region's debt crisis.
The Chinese government said earlier that its economy slowed less dramatically in the fourth quarter than analysts had expected.
The S&P 500 rose 9 points, or 0.7 percent, to 1,298 as of 10:50 a.m. Eastern time. It had risen as high as 1,303; the S&P has not closed above 1,300 since July 28.
The Dow Jones industrial average rose 109 points, or 0.9 percent, to 12,530. Only two of the 30 stocks in the Dow declined. The Nasdaq composite index rose 26, or 1 percent, to 2,736.
The market was closed Monday for Martin Luther King Jr. Day.
Bank stocks were mixed after several of them reported earnings. Wells Fargo & Co. rose 1 percent after its results beat Wall Street estimates as its lending business improved. Citigroup Inc. fell 6 percent and M&T Bank Corp. fell 2 percent after their earnings fell short of estimates.
Carnival Corp. plunged 14 percent after a cruise ship owned by one of its brands capsized off the coast of Italy, killing 11 passengers. Italian prosecutors are charging the captain with manslaughter, causing a shipwreck and abandoning his ship before all passengers were evacuated.
Royal Caribbean Cruises Ltd. Co. fell 4 percent as analysts predicted ripple effects through the industry.
Overseas markets rose earlier Tuesday after Spain auctioned off billions in short-term debt at sharply lower interest rates, indicating strong demand for the nation's bonds. Spain's borrowing costs had spiked in recent weeks on fears it would be engulfed by the crisis and default on its debts.
Standard & Poor's downgraded Spain on Friday. The strong demand at the auction suggested that investors took the downgrade in stride.
Greece also auctioned off short-term debt on Tuesday at a lower rate than it had been paying. The fund to bail out Greece and other troubled nations also raised money, despite a downgrade on Monday, the Wall Street Journal reported.
The bailout fund's credit rating is based on the ratings of the nations that contribute to it. It was downgraded because S&P had cut ratings for most of the nations that use the euro and back the fund.
Earlier, the Chinese government said its economic growth slowed to 8.9 percent in the fourth quarter. That was the lowest in two and a half years, but still better than the 8.7 percent predicted by analysts.
A rapid slowdown in China would threaten the world economy because growth already is slowing in Europe and across the developing world. Demand from China is needed to offset the loss of demand elsewhere.
Asian and European markets also rose. France's CAC 40 rose 0.9 percent, Germany's DAX added 1.4 percent.
Greece's international lenders are inspecting the nation's efforts at fiscal and structural reform and negotiating over its next round of bailout cash. Greece continues to rely on international loans to prevent a potentially disastrous default on its bonds.
Greece still lacks a deal with the private holders of those bonds. The international lenders say it needs a deal to get the next chunk of bailout cash.
Among the other U.S. companies making big moves Tuesday:
— Lions Gate Entertainment Corp. rose 4.7 percent after it agreed Friday to buy Summit Entertainment, owner of the blockbuster "Twilight" franchise, for $412.5 million in cash and stock.
— R. R. Donnelley & Sons Co. lost 15.6 percent, the most in the S&P 500, after the printing company said its 2011 profit margin will be narrower than it had forecast earlier.
Follow Daniel Wagner at www.twitter.com/wagnerreports.