NEW YORK – Stocks rose Thursday, recovering from earlier losses, as European governments considered deploying $1.3 trillion in funds to tame the sovereign debt crisis.

The Standard & Poor’s 500 rose 0.5 percent to 1,215.39 after falling as much as 1 percent. The Dow Jones industrial average climbed 37.16 points, or 0.3 percent, to 11,541.78.

“This whole situation makes doing my job, as a guy who’s trying to buy stocks based on a long-term view, almost laughably difficult,” said Brian Barish, the Denver-based president of Cambiar Investors. “The market is hypersensitive as to whether or not a plan will emerge that will stabilize Europe.”

Stocks rebounded as two people familiar with the matter said Europe may combine the temporary and permanent rescue funds to unleash as much as $1.3 trillion to fight the crisis.

German Chancellor Angela Merkel and French President Nicolas Sarkozy said in a joint statement they want euro region leaders to agree on a “comprehensive and ambitious” plan as the European Union plans another debt summit on Oct. 26.

“Europe needs some sort of TARP-like facility to backstop the banks to prevent contagion,” said Hank Smith, chief investment officer at Haverford Trust in Radnor, Pa. “It was difficult to do in the United States and it’s 17 times more difficult to do it in Europe. In the meantime, the market will seesaw back and forth.”

In the United States, better-than-expected corporate earnings and a report showing that manufacturing in the Philadelphia area unexpectedly expanded also helped lift stocks.

“Our forecast is that we avoid an economic recession,” said Stephen Wood, the New York-based chief market strategist for Russell Investments. “The earnings season looks to be a strong one. As the exogenous risks, including Europe, begin to abate, the market is going to discriminate between stronger earnings and better-run companies.”

Financial shares gained the most among 10 industries in the S&P 500, adding 1.8 percent as a group. The KBW Bank Index of 24 stocks rose 1.9 percent after falling as much as 1.3 percent. JPMorgan Chase added 2.7 percent to $33.13. Citigroup gained 2.4 percent to $30.08.

Philip Morris jumped 3.3 percent to $68.19. Chief Executive Officer Louis Camilleri raised prices in Japan, Australia and Indonesia, where demand pushed total shipments higher by 4.4 percent. Excluding excise taxes, total sales at Philip Morris, which generates all of its revenue outside the United States, advanced 26 percent to $8.36 billion.