Investors sent stocks higher in afternoon trading Friday, cheering news of an interest rate cut in China and the possibility that Europe's central bank will step up stimulus efforts in the region. The rally had the Dow Jones industrial average and Standard & Poor's 500 index on pace to extend their record highs from a day earlier.

KEEPING SCORE: The Standard & Poor's 500 index gained eight points, or 0.4 percent, to 2,061 as of 2:12 p.m. Eastern time. The Dow Jones industrial average rose 83 points, or 0.5 percent, to 17,802. The Nasdaq composite added 11 points, or 0.2 percent, to 4,712. The Dow and S&P 500 are at record highs.

THE QUOTE: A strong third-quarter earnings season, on top of a recent string of positive U.S. economic data on housing, jobs and manufacturing, have helped push the market higher since mid-October. Now the potential for more economic stimulus out of China and Europe makes stocks even more attractive, said Mike Serio, regional chief investment officer at Wells Fargo Private Bank.

"Central bank intervention is the No. 1 thing investors worldwide are looking at right now," he said. "In the short run, that looks pretty good for stocks."

SECTOR VIEW: Eight of the 10 sectors in the S&P 500 index rose, with materials stocks climbing the most. Design software company Autodesk jumped $5.90, or 7.1 percent, to $89.11. Utilities and telecommunication stocks declined.

EARNINGS SURPRISES: Investors bid up shares in several companies that reported better-than-expected earnings. Software maker Splunk rose $2.86, or 4.4 percent, to $67.80. Sporting goods retailer Hibbett Sports gained $2.96, or 6.4 percent, to $48.89.

EARNINGS MISSES: Aruba Networks fell 13.2 percent after the wireless communications company's outlook fell short of financial analysts' expectations. The stock shed $2.87 to $18.93. Gap and GameStop also reported results that fell short of forecasts. GameStop tumbled $5.67, or 13 percent, to $37.87. The Gap shed $2.24, or 5.6 percent, to $37.90.

GOING, GOING, GONE: Sotheby's added 7.7 percent a day after CEO William Ruprecht announced he will step down and that the New York auction house's board has started a search for its next chief executive. Shares rose $3.01 to $42.24.

BOARDROOM DEAL: Dow Chemical agreed to add four new members to its board of directors after pressure from hedge fund activist Daniel Loeb's Third Point. The stock rose $1, or 1.9 percent, to $52.48.

CHINA RATE CUT: China's central bank cut the interest rate on its one-year loans to financial institutions by 0.4 percentage point to 5.6 percent. The surprise reduction comes in the wake of recent figures showing that the country's annual growth rate slowed to a five-year low of 7.3 percent last quarter. Many analysts think a key motivation behind the rate cut is the recent steep decline in the value of the Japanese yen, which is likely to impact on China's exports.

DRAGHI ALSO MOVES MARKETS: European Central Bank President Mario Draghi also caused a stir in markets when he told a conference in Frankfurt, Germany, that the bank is willing to "step up the pressure" and increase its efforts to stimulate Europe's struggling economy. His comments sent the euro lower and stocks higher. If current efforts do not achieve the desired effect, Draghi said the ECB could "broaden even more the channels through which we intervene." For many in the markets, that's a clear hint that the bank could soon starting buying government bonds.

OVERSEAS MARKETS: In Europe, Germany's DAX jumped 2.6 percent, while the CAC-40 in France rose 2.7 percent. The FTSE 100 index of leading British shares rose 1.1 percent. In Asia, Japan's Nikkei index rose 0.3 percent, while Hong Kong's Hang Seng rose 0.4 percent. Seoul's Kospi added 0.3 percent.

COMMODITIES: The price of oil rose. Benchmark U.S. crude gained 36 cents to $76.19 a barrel in New York. Gold rose $6.80 to $1,197.70 an ounce, silver rose 26 cents to $16.40 an ounce and copper rose a penny to $3.03 a pound.

BONDS: U.S. government bond prices rose. The yield on the 10-year Treasury note fell to 2.32 percent from 2.34 percent late Thursday.

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AP Business Writer Pan Pylas in London contributed to this report.