NEW YORK (AP) -- Stocks rose sharply for a second straight day Wednesday on signs that the U.S. economy grew in September and that European officials are moving to support the region's struggling banks.

The Dow Jones industrial average rose 131 points. Most of the gain, 80 points, came in the last hour of trading.

Analysts attributed the rise to increasing optimism about Europe's efforts to contain its debt crisis and a pair of reports in the U.S. showing a pickup in hiring and growth in service companies last month.

The Financial Times reported late Tuesday that European officials are exploring a joint effort to support the region's banks. That triggered sharp rises in European markets, especially bank stocks.

Investors are worried that European banks could suffer deep losses if Greece starts missing debt payments, which is also known as a default. That could cause the value of Greek bonds held by the banks to drop sharply. If weakened banks pull back from lending to each other, it could cause another freeze in global credit markets, as occurred in late 2008.

The report, which came out after European markets closed Tuesday, triggered a late rally in U.S. stocks that prevented the S&P 500 from closing down 20 percent from its recent peak, reached in April. A fall that far would have met the test of a bear market.

Analysts cautioned that the two-day gain in stocks may not last, given the strains that are still affecting the U.S. economy.

"The market is trading on sentiment right now, not fundamentals," said Rob Stein, head of Astor Asset Management. "People are hoping that the bounce yesterday means that we've hit a bottom, but the problems that were in the economy Monday haven't changed since then."

Other traders pointed to meetings by the European Central Bank and the Bank of England Thursday in which officials are expected to discuss additional measures to increase investors' confidence in the European banking system.

"There's a reluctance to (bet that stocks are going to fall) when there's a chance that you'll see an announcement out of Europe to help the banks by the weekend," said Nick Kalivas, vice president of research at MF Global.

The Dow rose 131.21 points, or 1.2 percent, to close at 10,939.95. The Dow jumped 153 Tuesday after its late-day surge.

The Standard & Poor's 500 rose 20.09, or 1.8 percent, to 1,144.04. The Nasdaq composite jumped 55.69, or 2.3 percent, to 2,460.51.

European bank stocks soared, reflecting increasing optimism that European leaders will succeed in limiting the fallout from Greece's debt problems. Credit Agricole jumped 10 percent, and BNP Paribas gained 9 percent.

European markets rose broadly. Germany's DAX jumped 5 percent. Benchmark indexes in France and Italy rose 4 percent.

Reports that the U.S. economy continued to grow in September also sent stock indexes higher. The Institute of Supply Management said its gauge of the U.S. service sector, which employs 90 percent of the work force, grew in line with Wall Street's expectations. The index measures the strength of health care providers, banks, real estate, and other businesses outside of manufacturing. The ISM's index was 53 in September, down slightly from 53.3 in August. Any number above 50 indicates expansion for the sector.

Payroll processor ADP said private companies added 91,000 jobs last month. That was a slight gain from August. ADP's figures do not always predict the outcome of the government's broader report on U.S. employment in September, which will be released Friday. However ADP's report can often influence traders' expectations. Wall Street economists expect that the U.S. unemployment rate will remain unchanged at 9.1 percent.

The latest indications that the U.S. economy was growing, although modestly, pushed Treasury prices lower as investors moved money out of lower-risk investments. The yield on the 10-year Treasury rose to 1.90 percent from 1.82 percent late Tuesday. It hit a record low of 1.71 percent Sept. 22.

Energy and materials companies, whose profits depend on an expanding economy more than other industries, led the stock market higher.

Walt Disney Co. led the 30 stocks that make up the Dow with a 5.5 percent gain after a Citi analyst upgraded the stock, citing a recent pullback. McDonald's Corp. lagged, dipping 0.8 percent.

Monsanto Co. rose 5.2 percent after the seed maker reported results that beat Wall Street's forecasts. Wholesale club operator Costco Wholesale Corp. dropped 1.7 percent after its earnings came in slightly below analysts' expectations. The company said it will raise its annual membership fees in November.

Yahoo jumped 10.1 percent after Reuters reported that Microsoft is considering a bid for the company. BlackBerry maker Research in Motion also jumped 10 percent on speculation that the company may be up for sale.

A choppy but steady trend for the market (YM) today.

Was just on the right timing today regarding the early trade.

Did not do any more trades after the first trade.

That's were discipline counts in trading.

Sell limit got hit...gain 90 points...

Putting sell limit to 10800...moving stop to break even...

Bought YM at 10710 with stop at 10680...

The market is steadily on a sideways move.

Waiting for some climatic action.

Michael Martin is a full-time trader, instructor and writer of the acclaimed MartinKronicle blog. He now also boasts an Amazon top 20 investment book with “The Inner Voice of Trading: Eliminate the Noise, and Profit from the Strategies That Are Right for You”. I have just done a short interview with Michael, as reported below.

PduP: “The Inner Voice of Trading” is an interesting title for a book. What exactly is your “inner voice”?

MM: It’s a bit of a misnomer in that it’s a sense of calm and confidence that you have when you’re entirely present and in the zone, so to speak. I liken it to how a gifted athlete or actor can be in the moment and deliver a strong performance that seems to transcend the individual.

I promise you that when the Director says “Action”, Jack Nicholson is not thinking about his acting technique any more than SA cricketer Johan Botha is thinking about the mechanics of his grip while spinning / bowling. Victor Sperandeo does not need to consult a manual on his short-term set-ups when he’s looking at gold or silver for a trade.

PduP: What are the typical mental stumbling blocks people encounter and why are they so common?

MM: One stumbling block that I see all the time is how traders, men especially, do not embrace the concept of surrender. They equate it with quitting or losing. But “surrender,” the way I mean it, connotes taking the small losses along the way that are part of your methodology. If you’re a professional trader, losses are part of the business.

PduP: That’s a good analogy for trading.

MM: Yes, I think so. Ed Seykota, who wrote the Foreword to my book, said “Great traders have the talent as much as the talent has them.” My guess is that great traders — as well as great performers such as Nicholson, Streep, and Botha — lose themselves in the moment and rely on their preparation. There must be something that is greatly meditative in how they prepare. Therefore, when it comes time to execute, their inner voices kick in and they are simply present and they do as they are prompted to do.

PduP: What is something that my readers can do right now?

MM: I think keeping a journal of your emotional progress is the only way to go. Humans have short memories for things that are emotionally uncomfortable for them. Traders and financial advisors are humans first, and I believe our emotional systems truly run our professional lives, not what we can derive from asset allocation or a heuristically-based trading system.

Anything in the world can come to push your emotional buttons, so it is critical to keep a chronology of how you are evolving emotionally. That’s the only way you can grow. You have to be brutally honest with yourself and how you feel, especially when you’re losing money. Smart people don’t like being wrong, and they will do almost anything not to admit they were wrong nor take a short-term small loss because it is so unpleasant. Ironically, it is the taking of small losses that make your big winners look so good in the end.