The Financial Times reported late Tuesday that European officials were exploring a joint effort to support the region's banks. That triggered sharp rises in European markets, especially bank stocks.
Investors are worried that those banks could suffer deep losses if Greece starts missing debt payments and default. That could cause the value of Greek bonds held by those banks to drop sharply. If those banks weaken severely, they may cut back on lending. That could disrupt financial markets and even send Europe into a recession.
Analysts cautioned that the two-day gain in stocks may not last, given the strains still affecting the U.S. economy.
Traders pointed to meetings by the European Central Bank and the Bank of England on Thursday in which officials are expected to discuss additional measures to increase investors' confidence in the European banking system.
The Dow rose 131.21 points, or 1.21 percent, to close at 10,939.95. The Dow jumped 153 Tuesday after another late-day surge.
The Standard & Poor's 500 rose 20.09, or 1.79 percent, to 1,144.04. The Nasdaq composite jumped 55.69, or 2.32 percent, to 2,460.51.
European bank stocks soared, reflecting increasing optimism that European leaders will succeed in limiting the fallout from Greece's debt problems. Credit Agricole jumped 10 percent, and BNP Paribas gained 9 percent.
European markets rose broadly. Germany's DAX jumped 5 percent. Benchmark indexes in France and Italy rose 4 percent.
Reports that the U.S. economy continued to grow in September also sent stock indexes higher. The Institute of Supply Management said its gauge of the U.S. service sector, which employs 90 percent of the workforce, grew in line with Wall Street's expectations.
