NEW YORK — Signs that the economy is indeed strengthening gave investors a surge of optimism Tuesday and sent stocks sharply higher.
The Dow Jones industrials soared almost 170 points on upbeat earnings reports and corporate deals. Investors who have been anxious in recent weeks about economic problems overseas were able to put aside their concerns for the time being. They focused instead on the domestic economy.
The dollar fell as investors felt less of a need to stash their money in safer investments. Oil, gold and other commodities joined stocks as the beneficiaries of the market’s renewed confidence. And the stocks of energy and materials producers were among the day’s big winners.
European markets also rose following new plans by European Union leaders to push Greece to get its budget under control. European officials gave Greece one month to prove it can cut its deficits.
Debt problems in Greece, Portugal and Spain have been a major factor behind weakness in global stock markets in recent weeks.
A strong earnings report from Barclays, a major European bank, also gave the market some relief. European banks have been slower to recover than their U.S. counterparts, and investors saw the bounceback at Barclays as an encouraging sign.
In the U.S., Kraft Foods Inc. and apparel retailer Abercrombie & Fitch reported earnings that beat expectations, while drugmaker Merck & Co. said profits jumped after the company bought its longtime partner Schering-Plough.
Earnings reports over the past month have mostly come in better than expected, but problems in the global economy have overshadowed that good news and pushed the market lower.
“Earnings have been good but pushed to the back seat” behind Europe’s problems, said Alan Lancz, president of Alan B. Lancz & Associates in Toledo, Ohio.
Tuesday’s strong reports “superseded some of these worries,” Lancz said.
The Dow rose 169.67, or 1.7 percent, to 10,268.81. The Standard & Poor’s 500 index rose 19.36, or 1.8 percent, to 1,094.87, while the Nasdaq composite index rose 30.66, or 1.4 percent, to 2,214.19.
About five stocks rose for every one that fell on the New York Stock Exchange, where consolidated volume came to 4.2 billion shares, down from 4.5 billion Friday.
