Investors also shifted their attention toward the U.S. political scene. The U.S. Congress passed a two-month payroll tax cut extension after House Republicans surrendered on whether to endorse the measure days before its scheduled Dec. 31 expiration.

'Domestic Threat'

"The most important thing that happened was the agreement in Washington to extend the payroll tax cuts and unemployment benefits," David Kelly, who helps oversee $394 billion as chief market strategist for JPMorgan Funds in New York, said in a telephone interview. "That removes probably the biggest domestic threat to the economy in 2012."

Gauges of energy and financial shares added 5.4 percent and 4.9 percent, respectively, for the biggest advances among 10 industry groups in the S&P 500. The Morgan Stanley Cyclical Index rallied 4.1 percent amid economic optimism. GE jumped 7.2 percent to $18.23, while Walt Disney increased 6.7 percent to $37.70. Chevron Corp., the second-largest U.S. energy company by market value, gained 6.6 percent to $107.50. JPMorgan Chase & Co. rose 5.3 percent to $33.57.

The European Central Bank awarded 489 billion euros ($645 billion) in loans to the region's banks in the latest attempt to tame the debt crisis, far more than the median forecast for 293 billion euros in a Bloomberg survey of economists.

"There's some expectation that U.S. banks are benefiting from European banks pulling back, allowing them to increase deposits and market share," Luschini said.

Justice Department Probe

Bank of America rose 7.7 percent, the most in the Dow, to $5.60 after agreeing to a record $335 million settlement of a U.S. Justice Department probe into fair-lending lapses at its Countrywide Financial Corp. mortgage unit.

Akamai Technologies, operator of a server network that lets businesses speed data delivery, rose the most in the S&P 500 after agreeing to buy Cotendo for about $268 million in cash. The stock advanced 20 percent to $31.93.

Expedia Inc. gained 14 percent to $30.04. The online travel agency completed the spinoff of TripAdvisor Inc.