Strong results in Europe from BNP Paribas and HSBC added to the upbeat tone and lifted US bank stocks. JPMorgan Chase & Co rose 3.4 per cent to $41.64 and the KBW Bank index gained 3.2 per cent.
The falling greenback set off a 3 per cent jump in crude prices, which, coupled with BP's attempt to permanently cap its Macondo well in the Gulf of Mexico, sent energy shares soaring.
Macondo-linked companies rallied, with Transocean up 9.6 per cent to $50.68. The Philadelphia exchange oil services sector index climbed 4.5 per cent.
“Oil service and oil companies got overdone on the downside because of the problem in the Gulf, and now we are having a natural reaction back up,” said Carl Birkelbach, chief executive of Birkelbach Investment Securities in Chicago.
Crude futures settled above $81 per barrel for the first time since early May. The S&P energy sector jumped 3.6 per cent.
Raw materials also rose and the Reuters/Jefferies CRB commodity index hit a three-month high. Dow- listed aluminum company Alcoa advanced 4.8 per cent to $11.71 on the back of strong US manufacturing.
The Dow Jones industrial average gained 208.44 points, or 1.99 per cent, to 10,674.38. The Standard & Poor's 500 Index advanced 24.26 points, or 2.20 per cent, to 1,125.86. The Nasdaq Composite Index rose 40.66 points, or 1.80 per cent, to 2,295.36.
The S&P 500 closed the session above its 200-day moving average and the 1,121 level, the midpoint of the slide from its historic high reached in October 2007 and the 12-year low hit in March 2009, which has been viewed as a key resistance level.
The benchmark has not been able to close above this 50 per cent retracement since mid-May.
“The more times a level is tested, it heightens the significance of the move when you finally do break through,” said Richard Ross, global technical strategist at Auerbach Grayson in New York.