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NEW YORK (CNNMoney) -- U.S. stocks rallied ahead of the close Wednesday, ending the day higher. Investors grew more optimistic that European leaders could be moving closer to a resolution of its debt crisis.
Developments in Europe, rather than economic data from the U.S., continue to dictate market movements. Still, investors got glimpses of better-than-expected readings on the state of the U.S. economy in reports released Wednesday morning.
The Dow Jones industrial average (INDU) closed up 131 points, or 1.2%, after spending the first hour of trading in the red. Disney (DIS, Fortune 500), Cisco (CSCO, Fortune 500), and Hewlett Packard (HPQ, Fortune 500) were the biggest gainers on the blue-chip index.
The S&P 500 (SPX) closed 20 points higher, or 1.8%, while the tech-heavy Nasdaq (COMP) ended the day up 56 points, or 2.3%. Yahoo (YHOO, Fortune 500) helped propel the Nasdaq, after reports appeared that Microsoft (MSFT, Fortune 500) might be among the bidders in the company's sale.
The overall focus remains firmly on Europe, however, and investors are closely watching for any news on whether politicians might be amenable to recapitalizing European banks. Talks surrounding a recap intensified Wednesday, and German Chancellor Angela Merkel reiterated her country's commitment to moving swiftly to address problems in Greece.
A late-day U.S. stock rally Tuesday was sparked by a Financial Times report that European leaders were becoming more vocal about the need to recapitalize banks.
"Until Europe isn't part of the news, until there is some resolution to what is going on in Europe, it is going to be somewhere on the stage," said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
Stocks opened slightly lower on Wednesday as investors digested mixed reports on the U.S. job market, but those losses were erased after the Institute for Supply Management's services report showed an acceleration in business activity.
U.S. bank stocks closed the day mostly higher with Morgan Stanley (MS, Fortune 500), Goldman Sachs (GS, Fortune 500), and Citigroup (C, Fortune 500) among the biggest gainers.
Economy: Private-sector employers added 91,000 jobs in September, according to payroll processor ADP. Economists had forecast an increase of 45,000 private sector workers in September.
The number of announced layoffs more than doubled in September to 115,730 from August's 51,114, according to outplacement consulting firm Challenger, Gray & Christmas. That's the highest number of planned job cuts since April 2009.
The most important number of the week is Friday's employment report from the Labor Department. A CNNMoney survey of 22 economists forecasts that the U.S. economy added 65,000 jobs overall, with the unemployment rate expected to remain unchanged at 9.1%.
World markets: European stocks closed the day solidly higher. Britain's FTSE 100 (UKX) ended the day up 3.2%. DAX (DAX) in Germany gained 4.9% and France's CAC 40 (CAC40) jumped 4.3%.
In Asia, Japan's Nikkei (N225) lost 0.9%. Shanghai and Hong Kong were closed.
Companies: Monsanto (MON, Fortune 500)'s shares closed higher after the company reported a narrower-than-expected loss.
Costco (COST, Fortune 500)'s shares closed down after the retailer reported strong same-store sales but profits missed by 2 cents. Costco also announced an increase in membership fees.
Shares of Apple (AAPL, Fortune 500) rebounded Wednesday after dropping Tuesday. Investors signaled disappointment after the tech giant unveiled its newest generation of the iPhone but failed to live up to the hype over expectations of a radically changed iPhone 5.
Shares of hotel operator Marriott (MAR, Fortune 500) dropped in after-hours trading after the company reported its quarterly results.
Currencies and commodities: The dollar was little changed against the euro and British pound, but fell versus the Japanese yen.
Oil for November delivery gained $4.09 to $79.75 a barrel.
Gold futures for December delivery jumped $25.70 to $1,641.60 an ounce.
Bonds: The price on the benchmark 10-year U.S. Treasury dipped, pushing the yield up to 1.89% from 1.78% late Tuesday. 
| Index | Last | Change | % Change |
|---|---|---|---|
| Dow | 32,627.97 | -234.33 | -0.71% |
| Nasdaq | 13,215.24 | 99.07 | 0.76% |
| S&P 500 | 3,913.10 | -2.36 | -0.06% |
| Treasuries | 1.73 | 0.00 | 0.12% |
| Company | Price | Change | % Change |
|---|---|---|---|
| Ford Motor Co | 8.29 | 0.05 | 0.61% |
| Advanced Micro Devic... | 54.59 | 0.70 | 1.30% |
| Cisco Systems Inc | 47.49 | -2.44 | -4.89% |
| General Electric Co | 13.00 | -0.16 | -1.22% |
| Kraft Heinz Co | 27.84 | -2.20 | -7.32% |
| Overnight Avg Rate | Latest | Change | Last Week |
|---|---|---|---|
| 30 yr fixed | 3.80% | 3.88% | |
| 15 yr fixed | 3.20% | 3.23% | |
| 5/1 ARM | 3.84% | 3.88% | |
| 30 yr refi | 3.82% | 3.93% | |
| 15 yr refi | 3.20% | 3.23% |
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