> Details of the agreement, which includes the creation of a single supervisory body for euro area banks, remain to be worked out. But Italian and Spanish borrowing costs fell, though they remained not far from recent highs, as market expectation for any action during a two-day European Union summit had all but vanished.
"We've gotten used to being underwhelmed by the outcomes, so with little to no expectations for success, the fact that it appears we are going to get something substantial is a real important positive for the market in the near term," said Art Hogan, managing director of Lazard Capital Markets in New York.
"It's inching closer to a banking union and the closer we get to a banking union would put (the EU) well on the road to a fiscal union."
U.S. Bank stocks were among the market leaders as the risk of exposure to their European peers diminishes. The KBW bank index jumped 2.3 percent led by a 4.4 percent rise in shares of Citigroup.
Brent and U.S. crude prices soared more than 4.5 percent on the back of the EU agreement and further boosted by a near 2 percent jump in the euro against the U.S. dollar. The S&P energy sector added 2.2 percent.
Equities and other risky assets have recently been weighed by concerns that stubbornly high borrowing costs in Spain and Italy could force the fourth- and third-largest economies in the bloc to seek bailouts.
The Dow Jones industrial average rose 219.33 points, or 1.74 percent, to 12,821.59. The S&P 500 Index gained 25.91 points, or 1.95 percent, to 1,354.95. The Nasdaq Composite added 63.22 points, or 2.22 percent, to 2,912.71.
The steep gains trimmed a quarterly decline in the S&P 500 to just under 4 percent. The benchmark has, so far, gained 3.2 percent in June.
Trading could be volatile and see higher than average volumes as managers square positions ahead of the end of the second quarter. The outperformance of bonds in the past three months could trigger inflows into stocks and extend the expected rally.
The EU summit news overshadowed a batch of mixed U.S. data. Attention in Europe now turns to next week's European Central Bank meeting. The consensus is that the bank will cut its main refinancing rate by 25 basis points to 0.75 percent and may trim the deposit rate - the rate it pays banks for parking money with it - by 25 basis points to 0 percent.
Hospitals and insurers providing Medicaid plans for the poor were the main corporate winners from the U.S. Supreme Court's decision Thursday to uphold President Barack Obama's Affordable Care Act, as they prepare to see an influx of customers with no prior access to healthcare.
U.S.-traded shares of Research in Motion tumbled 16.5 percent to $7.62 in the wake of the company's decision Thursday to delay the make-or-break launch of its next-generation BlackBerry phones until next year.
Nike shares dropped 10.9 to $86.34 percent a day after the world's largest sportswear maker missed quarterly profit estimates for the first time in at least two years.
Shares of KB Homes rose 6.1 percent to $9.23 after the fifth-largest U.S. homebuilder reported a narrower second-quarter loss, helped by higher sale prices and net orders.
(Editing by Bernadette Baum, Dave Zimmerman)
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