Financial shares in the S&P 500 added 3.9 percent as European finance ministers began negotiations to prevent a Greek default and shield banks. McDonald’s rose 2.7 percent, while Bank of America Corp. (BAC) and Goldman Sachs Group Inc. climbed more than 4.3 percent after their quarterly reports. PulteGroup Inc. jumped 11 percent as data showed sentiment among homebuilders improved more than forecast. El Paso Corp. (EP) soared 28 percent after Kinder Morgan Inc. agreed to buy it.

The S&P 500 climbed 1.1 percent to 1,238.25, the highest since Aug. 3, and has risen three straight weeks. It has surged 13 percent since Oct. 3, when it closed within 1 percent of a bear market, or 20 percent plunge, from its high in April. The Dow Jones Industrial Average rose a fourth straight week, gaining 164.30 points, or 1.4 percent, to 11,808.79.

“We’ve had a combination of good economic news, better news out of Europe and third-quarter corporate earnings are coming along pretty well,” Philip Orlando, the New York-based chief equity market strategist at Federated Investors Inc., said in a phone interview. His firm oversees about $355 billion.

Equities rose yesterday as European finance ministers approved a 5.8 billion euro ($8.1 billion) loan to Greece, and France retreated in a clash with Germany over expanding the bailout fund. Talks continue through Oct. 26. The S&P 500 also gained after 74 percent of companies that reported quarterly results topped the average analyst projection.

Financial stocks rallied the most out of 10 groups in the S&P 500 this week following gains in European lenders. Bank of America, which has dropped 52 percent this year for the worst performance in the Dow, jumped 4.4 percent to $6.46. It posted third-quarter net income of $6.23 billion because of higher revenue, better credit quality and one-time gains.

JPMorgan Chase & Co. (JPM) added 4.8 percent to $33.42. It topped Bank of America as the largest U.S. bank by assets and posted the most third-quarter trading revenue among Wall Street firms that has reported results so far, leading for a fourth consecutive period.

Goldman Sachs climbed 5.5 percent, the most since November, to $102.09 as investors looked past the bank’s second quarterly loss since 1999, focusing on gains in trading revenue and prospects for a rebound in underwriting and takeovers.

Morgan Stanley (MS)

Morgan Stanley gained 12 percent, the most since July, to $17.02. The owner of the world’s largest brokerage reported profit that beat analysts’ estimates on a $3.4 billion accounting gain and higher revenue from stock trading.

McDonald’s rose 2.7 percent to a record $92.32. The world’s biggest restaurant chain reported third-quarter earnings of $1.45 a share, beating the $1.43 average analyst estimate, as lower-priced items boosted U.S. sales.

Profit for S&P 500 companies climbed 16 percent in the third quarter and will rise 18 percent to a record $99.25 for all of 2011, analyst estimates compiled by Bloomberg show.

“The earnings so far have implied that we’re not in a recession,” Ralph Shive, the South Bend, Indiana-based manager of the $1.65 billion Wasatch-Large Cap Value Fund, said in a telephone interview. “They were pretty stable and a slight positive as opposed to falling off the cliff.” Read More