--Stocks rise, reversing earlier losses
--Europe ticks higher, despite Greek debt solution delay; German economic
expectations index declines
--Home Depot leads blue chips on better outlook; Microsoft slides
By Matt Jarzemsky
NEW YORK--Home Depot led a rally in stocks tied to consumers' discretionary spending, leading U.S. stock benchmarks higher and fueled optimism about the U.S. housing market.
The Dow Jones Industrial Average added 42 points, or 0.3%, to 12857 in midday trading. Home Depot climbed 4.1% after raising its 2012 earnings forecast on housing-market improvement, putting the blue-chip retailer on track to close at a 12-year high.
The Standard & Poor's 500-stock index rose six points, or 0.5%, to 1386. The Nasdaq Composite Index was up one point, or 0.1%, at 2906.
"We've seen some evidence the past few weeks of improvement in the economy, particularly in the housing sector, and Home Depot appeared to have good earnings," said Cameron Hinds, regional chief investment officer at Wells Fargo Private Bank.
Worries about the fiscal cliff, a set of tax increases and government spending cuts set to take effect Jan. 1 if politicians can't reach a deal to avoid it, kept a lid on gains, Mr. Hinds said.
European markets rose, with the Stoxx Europe 600 adding 0.4%, despite disagreement between International Monetary Fund chief Christine Lagarde and Eurogroup President Jean-Claude Juncker on how Greece's debt should be tackled.
Meanwhile, the Center for European Economic Research's index of German economic expectations for November fell well below economists' expectations.
On the U.S. economic front, the National Federation of Independent Business said its small-business optimism index for October inched up in September, bucking economists' forecasts for a decline.
The federal budget deficit widened to $120 billion in October, the first month of the government's new fiscal year. The deficit compared with a $98.47 billion shortfall last year and was greater than economists' forecasts for $113 billion.
Asian markets also fell in response to concern about Greece. China's Shanghai Composite shed 1.5% and Japan's Nikkei Stock Average gave up 0.2% to record a seventh consecutive decline.
Crude-oil futures slipped 0.5% to $85.11 a barrel, while gold futures lost 0.4% to $1,724.70 an ounce. The dollar eased slightly against both the euro and the yen.
Elsewhere in the corporate arena, Microsoft fell 2.7% after news that Steven Sinofsky, head of the software maker's Windows business, is leaving the company.
Dick's Sporting Goods gained 4.9% after reporting quarterly results that topped its forecast and raising its current-year profit target.
Dow Chemical rallied 1% after Goldman Sachs analysts raised their stock-investment rating on the company to "buy" from "neutral."
Nanosphere added 3.3% after the medical-test maker said the U.S. Food and Drug Administration cleared it to market a new diagnostic tool.
-Write to Matt Jarzemsky at email@example.com