U.S. stocks rallied on Wednesday, with the Standard & Poor's 500 settling above 1,300 for the first time since July 28, on better-than-expected earnings from Goldman Sachs and strong home building number.

The Dow Jones industrial average gained 96.88 points, or 0.78 percent, at 12,578.95. The Standard & Poor's 500 jumped 14.37 points, or 1.11 percent, to 1,308.04. The Nasdaq Composite Index rallied 41.63 points, or 1.53 percent, to 2,769.71.

Banks got a boost after Goldman Sachs reported earnings which beat market expectations. The bank earned 978 million U.S. dollars, or 1.84 dollars per share, steeply down from 2.2 billion dollars, or 3.79 dollars per share a year earlier.

Technology sector was also leading the market higher after the Yahoo announced its co-founder Jerry Yang was leaving the struggling company as it tried to revive its revenue growth. Adding to the gains, a latest report showed home builder confidence reached a level not seen since 2007.

According to the National Association of Home Builders, its housing market index for January came in at a stronger-than- expected reading of 25. The level, though still far short of the reading of 50 that indicates positive sentiment, was the highest since June 2007, sending shares in home builders sharply higher.

News from Europe was also comforting on Wednesday. The International Monetary Fund said that it will raise its lending capacity by 500 billion dollars to insulate the global economy against any worsening of Europe's debt crisis.

Greece and its private creditors came back to the meeting table on Wednesday after abandoned the talk last Friday. News emerged that a deal might be reached by the end of this week as a member of the investor group said they are likely to get cash and securities with a market value of about 32 cents per euro of government bonds.

In other markets, the U.S. dollar fell against major currencies in late New York trading while oil prices edged down on Wednesday as International Energy Agency (IEA) saw weak energy demand in 2012.

Light, sweet crude for February delivery lost 12 cents, or 0.1 percent to settle at 100.59 dollars a barrel on the New York Mercantile Exchange.