Euro deal would centralize oversight over European Union nations' budgets. The euro deal boosted the Dow 173 points in midday trading, but Britain is a holdout and euro agreements in the past have ultimately disappointed investors.
US stocks on the Dow dropped 198 points to close at 11997 after the head of the European Central Bank said there was no plan for purchases of European government bonds. The drop in US stocks was the worst since November.
The Dow rose 46 points to close at 12196.37 as optimism about a European debt crisis summit rose and fell
Stock market prices in Europe and much of Asia are buoyed as Merkel and Sarkozy meet in Paris to discuss closer political, economic union. But the stock market in China fall on its worsening economic outlook.
Stocks advanced strongly as traders await fresh action to solve Europe's debt crisis. Belgian budget agreement and report of IMF help for Italy help ease negative pressure on European stocks.
Stocks plunge Monday as budget talks in Washington hit gridlock. The Dow average fell more than 300 points, with all 30 stocks losing value.
Referendum to be called in Greece: Prime Minister George Papandreou called for a referendum that may further destabilize the economy in Europe and undermine euro.
Stocks drop 1 percent or more on major European indexes because of concerns about Italian debt. Japan limits losses with yen intervention. US stocks expected to open lower.
Stock futures down slightly for the Dow, S&P. But NASDAQ stock futures rise as Asia and Europe post gains.