Wall St extends rally on euro-zone hopes

US stocks jumped 3 percent, extending gains into a second week as a pledge by German and French leaders boosted hopes that the euro-zone debt crisis may be resolved.

The gains lifted the S&P 500 above its 50-day moving average for the first time since late July, a bullish technical signal. The S&P 500 is now up about 11 percent since its low on Tuesday, when it briefly fell into bear-market territory.

German Chancellor Angela Merkel and French President Nicolas Sarkozy promised on Sunday to unveil a comprehensive new package to ease the euro zone's debt crisis.

Earnings season is set to begin with Alcoa's report tomorrow after the closing bell and will likely become a driver for stocks in coming weeks.

The Dow Jones industrial average surged 330.06 points, or 2.97 percent, to end at 11,433.18. The Standard & Poor's 500 Index climbed 39.43 points, or 3.41 percent, to 1,194.89. The Nasdaq Composite Index shot up 86.70 points, or 3.50 percent, to close at 2,566.05.

European stocks rose as a renewed pledge by France and Germany to come up with a plan by the end of the month to tackle the euro zone debt crisis and support the region's banks helped the market extend its sharp rally into a fourth session.

However, mounting expectation of a wave of recapitalisation in the banking sector as well as Erste Group Bank's warning that it would make a big loss this year prompted investors to book a portion of the recent strong gains made on banking stocks.

At 1116 GMT, the FTSEurofirst 300 index of top European shares was up 0.8 percent at 954.97 points. The benchmark index has gained nearly 9 percent since reaching a low last Tuesday.

The index's next resistance levels are at 978.57 points, which represents a high reached on Sept. 1, and 983.41 points, the 50 percent retracement of the July 22-Sept. 23 nosedive.