By Donna Kardos Yesalavich

U.S. stocks climbed Tuesday thanks to easing concerns about European governments' debt loads and improving conditions in New York-area manufacturing.

The Dow Jones Industrial Average (DJI) was up 126 points, or 1.2%, to 10225, in recent trading. The Nasdaq Composite (RIXF) climbed 1%. The Standard & Poor's 500 index (SPX) rose 1.3%. All its sectors were higher, led by energy and materials as commodities climbed.

A weaker dollar and renewed tension over Iran's nuclear ambitions boosted crude oil futures above $76 a barrel. Futures in gold, which has been trading as a risk asset in recent months, climbed $27.40 to $1,117.40.

The commodities gains came as the dollar slipped from the nine-month high it reached against the euro on Monday after fellow euro-zone countries agreed to give Greece one month to show it can right its unbalanced budget before demanding steep spending cuts and fresh taxes.

The U.S. Dollar Index (DXY), which tracks the greenback against a basket of six currencies, was down 0.6%.

Meanwhile, Treasurys slipped, with the 10-year note off 1/8 to yield 3.708%, as fears over sovereign debt in the euro zone ebbed somewhat as the European finance ministers' meeting provided more visibility into the euro zone's coordination.

"In the long run, there's a better mechanism in Europe than in the U.S. for getting the deficit down," since American policy makers don't have to coordinate with other countries that might pressure them to curb borrowing, said Axel Merk, president of the currency-focused Merk Mutual Funds.

Merk's firm has been buying euros recently, as it sees the Greece crisis as an opportunity to grab euros on the cheap.

Kent Engelke, chief economic strategist of Capitol Securities Management, said a lack of reports on new sovereign debt problems in Europe over the weekend, in addition to a lack of reports of further tightening in China, also helped boost sentiment toward stocks and commodities Tuesday.

In recent weeks, sovereign debt issues in countries including Greece and Portugal, along with China's moves to put the brakes on its rapid growth have been a big weight on stocks, especially in the materials sector.

"That then suggests this market does have more resiliency," Engelke said. "It's always bad when you go down with no news whatsoever, and it's always very positive that you rally in absence of bad news."

Also providing a boost Tuesday, the Federal Reserve Bank of New York's Empire Manufacturing Survey showed conditions for New York manufacturers improved sharply in February, with its business conditions index rising to 24.91 this month, from 15.92 in January. Economists had expected a reading of 16.0 in February.

Movers and shakers

Among stocks in focus, shares of Terra Industries Inc. (TRA) jumped 22% after the U.S. fertilizer producer agreed to be acquired by Norway's Yara International (YARIY) in a $4.1 billion cash deal. The offer represents a a 23.6% premium to Terra's Friday close.

American depository shares of Barclays Plc (BCS) climbed 12% as the U.K. banking giant said its net profit for 2009 more than doubled, beating analysts expectations.

Bank of America Corp. (BAC) was the measure's best performer, up 3.3% after the banking giant reported "significant gains" in the number of modified mortgages it handles through the government's Home Affordable Modification Program, designed to lower monthly payments for struggling customers.

Chevron Corp. (CVX) was also strong, up 2.4%, following a ratings upgrade from Bernstein Research in addition to a rise in crude-oil futures.

Merck & Co. (MRK) gained 3% as its fourth-quarter profit and sales rose sharply on its recent takeover of Schering-Plough. The drug maker also laid out plans to cut 15% of its work force to generate cost savings from the deal.

Kraft Foods (KFT) was one of two Dow components in the red recently. The stock fell 1.3% as its fourth-quarter revenue came in slightly short of analysts' expectations.