Stocks stage big rally

NEW YORK (CNNMoney.com) -- Stocks surged Tuesday, pushing the Dow up over 200 points, as worries about Europe's debt woes hurting U.S. growth eased and the euro rallied.

The Dow Jones industrial average (INDU) gained 214 points, or 2.1%. The S&P 500 index (SPX) gained 26 points, or 2.4% and the Nasdaq composite (COMP) gained 62 points or 2.8%.

Stocks gained from the get go Tuesday, as strength in European markets and a rally in the euro reassured investors worried about how global growth will impact the U.S. Solid demand for government debt auctioned in Spain, Belgium and Ireland helped take the edge off euro zone growth worries.

"Today, we're seeing a little bit of a better situation out of Europe and so stocks are up," said Mike Stanfield, chief investment officer at VSR Financial Services.

"But my feeling is we've entered a trading range where we're going to go up or down day-to-day but not really make much progress," he said. "On the down days, there will be economic reasons and on the up days, there will be reasons. But it's really just a function of the trading range."

Stocks managed to surpass a key point in that range by the close, with the S&P 500 ending at 1,115, above the 200-day moving average. The Dow and Nasdaq were also at key technical milestones. Closing above these so-called "resistance levels" may put the market in a better position to extend the recent advance.

After falling for the better part of six weeks, stocks began to stabilize in the middle of last week. The advance continued through most of Monday after a report showed European industrial production surged in April, but stocks lost some steam in the afternoon after Moody's downgraded Greece's debt, reminding investors that Europe's crisis is alive and well.

The major indexes lost more than 12% each between the bull market rally highs of late April and last week's lows. But the selling could be deeper in the aftermath of a rally that pushed the S&P up 80% off the March 2009 lows.

What's moving: All 30 Dow stocks rose, led by Boeing (BA, Fortune 500), Caterpillar (CAT, Fortune 500), McDonald's (MCS), 3M (MMM, Fortune 500), Microsoft (MSFT, Fortune 500) and United Technologies (UTX, Fortune 500).

Commodities stocks surged as the dollar fell, boosting dollar-traded commodity shares. The Oil Services Holders Trust (OIH) ETF rallied 4% and the Deutsche Bank Energy (DXE) index gained 3%.

Chip stocks rallied on reports that Taiwan Semiconductor Manufacturing and United Microelectronics Corp., two of the world's biggest chip makers, said global chip demand will grow in the second half of the year. Chip and chip gear makers rose, including Intel (INTC, Fortune 500), Broadcom (BRCM, Fortune 500), Micron Technology (MU, Fortune 500) and Applied Materials (AMAT, Fortune 500).

Market breadth was positive. On the New York Stock Exchange, winners topped losers six to one on volume of 1.17 billion shares. On the Nasdaq, advancers topped decliners four to one on volume of 2.26 billion shares.

Company news: Boeing (BA, Fortune 500) shares rose 4% after the company said it was increasing production on its popular narrow-body 737 planes for the second time in two months, citing improved demand in a recovering economy. Starting in 2012, the Dow component will produce 35 planes per month, rather than 34.

Manufacturer Illinois Tool Works (ITW, Fortune 500) boosted its second-quarter earnings forecast, saying it saw increased demand across a broad range of its customers in North America and beyond. Shares gained 2.5%.

News Corp (NWSA) shares rallied 8% in active Nasdaq trading as investors bet it will eventually win in its battle to take full control of BSkyB, the British satellite broadcaster. Earlier, BSkyB rejected News Corp's $12 billion bid to buy the 61% of the company that it doesn't already own, saying that the offer is too low.

Best Buy (BBY, Fortune 500) reported higher sales and earnings that missed expectations, as stronger sales of cell phones and computers were offset by weaker sales of music and movies. Best Buy shares fell 6%.

Gulf oil spill: Executives from BP and four other major oil companies testified before a House committee in the wake of the spill that has ravaged the Gulf.

Comments from lawmakers were critical of the "cookie cutter" contingency plans of BP, Exxon Mobil (XOM, Fortune 500), Chevron (CVX, Fortune 500), ConocoPhilips (COP, Fortune 500) and Shell Oil.

Exxon Mobil CEO Rex Tillerson said his company would have used a different well design and cement formulation than what BP used at the Deepwater Horizon rig that exploded and sank on April 20, killing 11 workers and causing the leak. However, he conceded that his company was not prepared to deal with a worst-case scenario event like the oil spill.

Earlier, Fitch downgraded BP (BP)'s debt rating for the second time this month, leaving it at a level just above junk status.

Euro: The euro rose 0.9% versus the dollar, continuing to recover after touching a four-year low of $1.188 last week. The dollar fell 0.4% against the yen.

Economy: Import prices fell 0.6%, the Labor Department reported, the lowest drop in nearly a year, with inflation likely to stay mild. Export prices also rose 0.6%.

The Empire manufacturing survey, a reading of manufacturing in the New York area, rose to 19.57 in May from 19.11 in April, missing forecasts for a rise to 20.0.

World markets: European markets gained. Britain's FTSE 100 rose 0.3%, Germany's DAX rose 0.8% and France's CAC 40 gained 1%.

Asian markets gained. Japan's Nikkei and Hong Kong's Hang Seng ended just above unchanged and China's Shanghai Composite added 0.3%.

Commodities: U.S. light crude oil for July delivery rose $1.95 to settle at $76.94 a barrel on the New York Mercantile Exchange.

COMEX gold for August delivery rose $11.70 to settle at $1,234.40 an ounce.

Bonds: Treasury prices fell, raising the yield on the 10-year note to 3.31% from 3.28% late Monday. Treasury prices and yields move in opposite directions.