Germany and France agreed on a debt plan for European countries lifting the markets to a higher close with the Dow gaining 78 points to 12,097. Nasdaq climbed 28 points to 2655.

On the upside

Barclays Capital analyst Stephen Kim said that the housing market will begin to recover next year lifting shares of mortgage insurers MGIC Investment (NYSE: MTG) and Radian Group (NYSE: RDN).

BTIG initiated coverage of Assured Guaranty (NYSE: AGO) with a Buy rating and a price target of $35.

SAP's (NYSE: SAP) $3.4 billion acquisition of SuccessFactors (Nasdaq: SFSF) sparked speculation that Ariba (Nasdaq: ARBA) may also be targeted for a buyout.

On the downside

Needham downgraded Hi Tech Pharmacal (Nasdaq: HITK) to a Hold rating.

Investors locked in profits on Pacific Ethanol (Nasdaq: PEIX) whose stock price climbed last week after the company regained compliance for Nasdaq listing.

Shares of Amgen (Nasdaq: AMGN) fell after the Food and Drug Administration said that Affymax's (Nasdaq: AFFY) drug for anemia in dialysis patients with chronic kidney disease was just as effective as Amgen's Epogen and Aranesp.

In the broad market, advancing issues outpaced decliners by a margin of nearly 7 to 2 on the NYSE and by nearly 5 to 2 on Nasdaq. The Russell 2000 which tracks small cap stocks gained 12 points to 747.