The U.S. retail sector flirted with its all-time stock high today as markets rallied on hopes that European leaders could piece together a suite of fixes for the continent’s debt-addled finances.


At 1:00, the S&P Retail Index was trading up 1.6 percent, or 8.77 points, to 556.29 — within striking distance of the index’s all-time high of 559.73, set in July. The Dow Jones Industrial Average rose 0.9 percent, or 101.08 points, to 11,909.87 as equipment maker Caterpillar reported strong quarterly results.


Among the U.S. retailers gaining ground today were Ralph Lauren Corp., up 4.9 percent to $158.12; Macy’s Inc., 4.8 percent to $31.26; VF Corp., 3.6 percent to $137.50; Limited Brands Inc., 2.6 percent to $43.82; Nordstrom Inc., 2.1 percent to $52.66; Liz Claiborne Inc., 1.9 percent to $8.06, and Nike Inc., 1.1 percent to $95.43.


Each of these companies set a new 52-week high today, marking what’s been a good run for retail and fashion stocks overall.


Stocks in the sector plummeted with the broader market in August, after Standard & Poor’s downgraded U.S. debt and Europe’s financial troubles sharpened. But the sector fared better in September as the back-to-school season wrapped up decently.


“It seems to be trading like an economic proxy in that the economy seems to have sidestepped at least for now the doom and gloom, the recession talk,” said Andrew Fitzpatrick, director of investments at Hinsdale Associates. “It’s almost starting to factor in an improving economy. It’s looking outward, taking some better data and running with it. And it may be going a little to far on that extreme.”


Earlier this month, the Commerce Department said seasonally adjusted retail sales grew 1.1 percent in September — much stronger growth than economists were predicting.


Today, shipper FedEx Corp. said it expects to ship more than 260 million packages between Thanksgiving and Christmas this year — a 12 percent increase over a year earlier.


The company said apparel, electronics, luxury goods, books and other items from large Internet retailers would account for a large portion of the its holiday shipping. FedEx expects to have its busiest day ever on Dec. 12 when it expects to make more than 17 million shipments.


But market stability still hinges on a plan to right Europe’s debt woes.


Major stock markets in the region closed on a high note Monday, with investors clearly hoping for a resolution to the region’s debt crisis later this week. Paris’ CAC 40 led the rally, closing up 1.6 percent, followed by Frankfurt’s DAX, which rose 1.4 percent. The FTSE 100 in London climbed 1.1 percent, followed by Milan’s FTSE MIB, which inched up 0.7 percent.


Retail and luxury stocks put in a mixed performance in Europe with the day’s biggest gainers including retail group Arcandor, which soared 3.3 percent; the Swatch Group, which climbed 3.8 percent, and Carrefour, which rose 2.9 percent. Among the stocks that lost ground were Italian eyewear maker Marcolin, which was down 1.7 percent; Hermes, which fell 1 percent, and Ferragamo, which slid 0.8 percent.


Asian markets kicked off the trading day strongly with the Hang Seng Index up 4.1 percent in Hong Kong and the Nikkei 225 ahead 1.9 percent in Tokyo.


After a summit over the weekend, European Union leaders are set to meet once again on Wednesday to finalize their proposal aimed at easing the region’s debt woes.


Their plan will involve beefing up Europe’s main bailout fund; a demand for banks to raise capital as a buffer for future hard times; and a greater write-off for financial institutions with exposure to Greek debt.