NEW YORK ( TheStreet) -- Stocks surged late in Tuesday's session to close nearly 2% higher following a report that France and Germany agreed to expand the European bailout fund to €2 trillion. According to a Guardian report, France and Germany reached an agreement to boost the eurozone rescue fund to €2 trillion ($2.76 trillion) to lend additional support to countries struggling under the region's sovereign debt crisis. The news comes ahead of an Oct. 23 summit from which European leaders are expected to emerge with a definitive plan for Greece. The Dow Jones Industrial Average soared by more than 200 points immediately following the news, but finished 180 points, or 1.6% higher, at 11,577. The index rebounded from an almost 250-point loss in the prior session. The S&P 500 gained 25 points, or 2%, to close at 1225 and the Nasdaq climbed 43 points, or 1.6%, to finish at 2657.
The CBOE Volatility Index declined by roughly 7%, but remained above the 30-level, at 31.07. News that Moody's downgraded Spain's bond rating to A1, from AA2, with a negative outlook late Tuesday may pressure markets during Wednesday's session however. The ratings agency cited Spain's vulnerability to the tenuous situation in Europe and the country's weak growth prospects. After Tuesday's closing bell, Apple ( AAPL) reported its first earnings per share miss since 2004, posting a profit of $7.05 a share compared with the profit of $7.39 a share that analysts had been expecting. Shares closed up by 0.5% at $422.24, but were losing 5% to $401.11 during the after-hours trading session. Big tech names Intel ( INTC) and Yahoo! ( YHOO) also released earnings late Tuesday. Intel easily topped third-quarter profit expectations by 8 cents with earnings of 69 cents a share on sales of $14.3 billion. Analysts had been projecting revenue of $13.88 billion. Intel's stock closed 0.5% higher at $23.40 and gained 4.3% to $24.40 in late trading. Shares of Yahoo! ( YHOO) were advancing 4.1% to $16.09 in after-hours trading after the company reported better-than-expected earnings of 21 cents a share, compared with the profit of 17 cents a share that Wall Street had been expecting. Sales of $1.07 billion were in line with analysts' estimates. Market watchers spent most of Tuesday's session weighing the latest earnings results against news coming out of the eurozone. Dow component IBM ( IBM) was at the bottom of the index, after the tech bellwether's revenue and profits fell short of expectations. The stock closed off by 4.1% at $178.90. Coca-Cola ( KO) was the only other Dow component to end the session in negative territory despite reporting better-than-expected adjusted third-quarter earnings of $1.03 a share. Shares slipped 0.4% to $66.74. However, a 10% rise in Bank of America ( BAC) shares helped offset that loss. The company beat estimates, reporting a profit of $6.2 billion. Revenues were up 6% at $28.8 billion, compared to the consensus view of $25.95 billion. Shares rose 10.1% to $6.64. Goldman Sachs ( GS) shares gained 5.5% to $102.25 after the company
reported a third-quarter loss of $393 million that stemmed from a steep decline in the value of its own investment portfolio. Analysts expected a loss of $4.29 billion in revenue, according to Thomson Reuters. Earlier, Peter Cardillo, chief market economist at Rockwell Global Capital, credited earnings and a strong reading on homebuilder confidence for the day's gains. On Tuesday morning, the National Association of Home Builders said its housing market index jumped by four points to a reading of 18 in October. "That may be a good indication that the housing market is finally hitting bottom," he said. Cardillo also said the market appears to be pricing in additional clarity regarding Europe's plan to address its sovereign debt crisis. "I believe that we will also get some type of expansion of the euro bond fund as early as next weekend, and that should help ease eurozone fears," he added. Overnight, China reported that its economy grew at a pace of 9.1% in the third quarter, down from 9.5% in the prior quarter. The reading fell short of economists' forecast for 9.2% and was the slowest pace since the second quarter of 2009. European stocks pared losses after the U.S. market opened. London's FTSE dropped 0.48% while Germany's DAX gained 0.31%. Japan's Nikkei Average finished down 1.5%, and Hong Kong's Hang Seng plunged by 4.2%. In the U.S., the producer price index rose 0.8% in September, higher than the estimated 0.2%. Core producer prices, which exclude food and energy costs, edged up 0.2%. Economists expected the core index to rise by 0.1%. The dollar index, a measure of the dollar's value against a basket of currencies, slipped 0.2%. The benchmark 10-year Treasury was down 5/32, lifting the yield to 2.173%. Gold for December delivery lost $23.80, or 1.4%, to settle at $1,652.80 an ounce. In other commodities, the December crude oil contract added $1.91, or 2.2%, to settle at $88.53 a barrel. -- Written by Melinda Peer in New York.