The S&P 500 posted its third straight week of gains on Friday, lifted by optimism before this weekend's summit of European leaders and strong earnings from blue-chip stocks.

U.S. stocks rose in a broad rally to their highest levels since early August after a volatile week.

Important differences still separate major players France and Germany in solving Europe's debt crisis, but with two summits scheduled for next week, investors took an optimistic view that a resolution will soon be reached. Buying was also motivated by fear of missing a sharp move if basic agreements are reached over the weekend.

I think there's at least better visibility on the path to resolution of the European sovereign crisis, and I think the markets are responding to that, even though there is not a specific concrete agreed-upon solution at this stage, said Natalie Trunow, chief investment officer of equities at Calvert Investment Management in Bethesda, Maryland, which manages about $14.8 billion.

Consumer discretionary stocks were the best performing among S&P sectors after McDonald's Corp reported higher-than-expected quarterly profit.

Shares of the fast-food restaurant chain jumped to a new high of $92.45 earlier. The stock ended up 3.7 percent at $92.32 and the S&P consumer discretionary sector <.GSPD> gained 2.8 percent.

The Dow Jones industrial average <.DJI> was up 267.01 points, or 2.31 percent, at 11,808.79. The Standard & Poor's 500 Index <.SPX> was up 22.86 points, or 1.88 percent, at 1,238.25. The Nasdaq Composite Index <.IXIC> was up 38.84 points, or 1.49 percent, at 2,637.46.

For the week, the Dow was up 1.3 percent and the S&P rose 1.1 percent, but the Nasdaq fell 1.1 percent.

Recent gains have pushed the S&P 500 to the top of its trading range between 1,230 and 1,250, where it has struggled to advance. Many investors are looking for progress in Europe before earnings can push equities much higher. Light volume suggests investors aren't entirely convinced of the move; just 7.91 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq on Friday, below this year's daily average of about 8 billion.

Equity markets have been susceptible to rapid and violent swings in recent weeks as traders latch on to varying headlines on Europe's debt crisis, leaving markets prone to volatility heading into the weekend.

Among industrial companies, Honeywell International Inc climbed 5.8 percent to $51.28 after it reported better-than-expected results and lifted its earnings outlook. The commercial aerospace company rose as much as 5.7 percent, its biggest gain since May 2010.

General Electric Co's third-quarter earnings met Wall Street's estimate, driven by strong demand from Brazil, Russia and China. But its shares fell 1.9 percent to $16.31 as investors worried about declining profit margins at GE's energy equipment division.

The S&P industrials index <.GSPI> advanced 1.9 percent.

According to Thomson Reuters data, of the 133 companies in the S&P 500 that have reported earnings through Friday, 68 percent have topped analysts' expectations.

On the NYSE, about eight stocks rose for every one that fell. On the NASDAQ, advancers beat decliners by a ratio of about 4 to 1.

(Additional reporting by Caroline Valetkevitch; Editing by Kenneth Barry)

Germany Russia China New york city