Optimism amid better-than-expected US corporate earnings and economic data helped propel Wall Street, with the mood underpinned by expectations the obstacles to Spain finally seeking European Union financial assistance are being cleared.
Shares of Johnson & Johnson rose, last up 1.2 per cent, after the company posted better-than-expected third-quarter profit and upgraded its 2012 earnings forecast. Shares in State Street also were higher as its results beat expectations.
In other corporate news, Vikram Pandit unexpectedly resigned as chief executive of Citigroup, with some reports suggesting he was ousted amid a clash with the board of directors over strategy for the company and recent missteps with regulators. Its shares rose.
In afternoon trading in New York, the Dow Jones Industrial Average climbed 0.93 per cent, the Standard & Poor's 500 rose 1.03 per cent and the Nasdaq Composite Index gained 1.05 per cent.
"One of the biggest things coming into this earnings reporting season was this drumbeat for how bad it was going to be," Art Hogan, managing director of Lazard Capital Markets in New York, told Reuters.
"We went through a period of time last week where we focused on how bad it was going to get, and we've got a chance to get some of that back because the worst-case scenario is not playing out.
Investors are eyeing results of Intel and IBM due later today.
Also underpinning the mood today were the latest US economic data. While not wildly optimistic, they at least offer hope that the world's largest economy keeps chugging along.
Homebuilders, for example, are feeling more confident. The National Association of Home Builders/Wells Fargo builder sentiment index rose to 41 in October this month, the highest level in a little over six years.
And a Federal Reserve report showed that output at factories, mines and utilities increased 0.4 per cent in September, following a 1.4 per cent drop in August. The median estimate in a Bloomberg survey of 85 economists called for production to rise 0.2 per cent
Separately a Labor Department report showed that the Consumer Price Index climbed 0.6 per cent in September, bolstered by a rise in petrol prices, though there's no need to worry about inflation any time soon.
"The Fed can confidently focus on propping up the economy because inflation is not a problem," Cary Leahey, an economist at Decision Economics in New York, told Reuters.
Europe's Stoxx 600 Index finished the day with a 1.3 per cent gain from the previous close. The euro also strengthened.
Helping sentiment was a Bloomberg report saying that Germany is open to Spain seeking a precautionary credit line from Europe's rescue fund, citing two senior coalition lawmakers, and signalling a reversal of Finance Minister Wolfgang Schaeuble's public position.
It's the latest sign that Germany is softening its hardline stance against the euro zone's most debt-laden nations, bolstering hopes the region will finally solve the crisis that's plagued it for nearly three years.
Separately, a report showed that investor confidence in Europe's largest economy improved again in October.