U.S. stocks rallied, preventing a weekly drop in benchmark indexes, as American consumer confidence topped estimates and Italy’s approval of debt- reduction plans eased concern about Europe’s debt crisis.

Stocks extended gains as the Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to 64.2 this month, the highest since June. The median estimate of economists surveyed called for 61.5. Earlier gains were driven by a drop in Italian bonds yields as the Senate approved budget measures in a bid to allow for a new government. In Greece, Lucas Papademos, a former vice president of the European Central Bank, will be sworn in as premier of a unity government.

Dow 12,155.50 +261.71 +2.20%, Nasdaq 2,677.01 +51.86 +1.98%, S&P 500 1,263.74 +24.04 +1.94%

All 10 groups in the Standard & Poor’s 500 Index rose as 491 stocks climbed.

Bank of America Corp. (BAC) and Citigroup Inc. (C) increased at least 3.1 percent as financial shares advanced.

Caterpillar Inc. (CAT) and Alcoa Inc. (AA) climbed more than 2.6 percent to pace gains among the biggest companies.

Walt Disney Co. (DIS) jumped 7 percent as the biggest theme-park operator reported a 30 percent gain in profit, beating estimates. Higher fees from pay-TV operators, advertising gains and improved results at resorts drove revenue and profit growth. Audience ratings for ESPN increased 13 percent in the quarter, according to Nielsen data provided by Barclays Capital. Disney resorts benefited from higher ticket prices and a new ship.

E*Trade Financial Corp. fell 3.3 percent to $9.17. The online brokerage’s board rejected putting the company up for sale following a strategic review spurred by Citadel LLC, the company’s biggest shareholder.