Stocks rose on Friday and were on track to end the week higher as Italy's Senate approved economic reforms, easing investors' concerns about the euro zone's debt crisis.

Italian bond yields, which earlier this week hit the highest level the euro was introduced in 1999, fell sharply after Italy's upper chamber approved economic reforms on Friday.

The package of austerity measures demanded by the European Union now goes to the lower house, which is expected to approve it on Saturday.

Passage would trigger the resignation of Prime Minister Silvio Berlusconi. Former European Commissioner Mario Monti is widely expected to take over as head of a broadly based national unity government. An index of European shares rose 2.2 percent to end at 984.62.

Equities are being whiplashed by European headlines and we seem to regularly alternate between very negative panic headlines and very positive solution headlines, said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.

There is no consistency here and there remains a lot of skepticism. The bad news isn't over by any means.

In debt-loaded Greece, the prime minister-designate, Lucas Papademos, a former vice president of the European Central Bank, will name a new crisis cabinet to roll out austerity plans.

The Dow Jones industrial average <.DJI> shot up 273.59 points, or 2.30 percent, tot 12,167.38. The Standard & Poor's 500 Index <.SPX> climbed 25.86 points, or 2.09 percent, to 1,265.55. The Nasdaq Composite Index <.IXIC> gained 56.21 points, or 2.14 percent, to 2,681.36.

Financial shares, seen as vulnerable because of their exposure to European debt, ranked among the best performers. Bank of America Corp rose 4.3 percent to $6.49, and JPMorgan Chase & Co gained 2.6 percent to $33.59. The KBW Bank index <.BKX> climbed 2.2 percent.

Walt Disney Co jumped 6.2 percent to $36.77 after the media and entertainment group reported a 7 percent gain in revenues and a 30 percent jump in profit, trumping expectations.

On the economic front, data showed U.S. consumer sentiment rose to its highest level in five months in early November as Americans felt better about the economic outlook.

(Reporting by Angela Moon; Editing by Jan Paschal)