* Wall Street gains on earnings, Caterpillar price target
* Bonds rise as index on U.S. home builder sentiment dips
* U.S. dollar struggles, euro close to 14-month high
* U.S. oil jumps above $79 a barrel on market optimism (Adds Apple's results in paragraph 7)
By Herbert Lash
NEW YORK, Oct 19 (Reuters) - Global stocks rallied to fresh 12-month highs on Monday as surprisingly strong corporate results spurred a bullish mood in financial markets that also drove U.S. oil prices above $79 a barrel.
The dollar held near 14-month lows against the euro, but expectations that the U.S. currency will remain on a downward slope lifted copper to its highest level in more than a month and bolstered the price of other commodities, including gold.
U.S. gold futures ended higher as the weak dollar boosted bullion's appeal as a hedge against the eroding value of paper assets.
U.S. stocks jumped almost 1 percent, lifting all three major U.S. stock indexes to fresh 12-month highs amid rising investors' bullishness over third-quarter earnings.
As of midday on Monday, of the 62 companies in the S&P 500 that had reported results, 79 percent were above analysts' expectations, according to data compiled by Thomson Reuters.
"So far three out of four earnings have been better than expected, no real horror stories, and at this point (the advance) looks set to continue," said Frank Lesh, a broker and futures analyst with Future Path Trading in Chicago.
After the bell, Apple Inc reported results that streaked past Wall Street forecasts on record quarterly iPhone and Mac sales, sending its shares to all-time highs.
Better-than-expected results from such companies as diversified manufacturer Eaton Corp and Gannett Co Inc, the largest U.S. newspaper publisher, buoyed investors looking for confirmation the economy is stabilizing.
Caterpillar led the Dow higher, gaining 6 percent, after Bank of America Merrill Lynch raised its stock price target to $65 from $52, and increased its 2010 and 2011 earnings-per-share forecast.
Caterpillar, which reports quarterly results on Tuesday, rose to $57.85.
The Dow Jones industrial average closed up 96.28 points, or 0.96 percent, at 10,092.19. The Standard & Poor's 500 Index gained 10.23 points, or 0.94 percent, at 1,097.91. The Nasdaq Composite Index climbed 19.52 points, or 0.91 percent, to finish at 2,176.32.
European shares also hit a fresh 12-month closing high, and Asian shares hovered near 14-month highs.
The FTSEurofirst 300 <.FTEU3> index of leading European shares rose 1.7 percent to 1,026.46, its highest close since Oct. 3, 2008.
Stronger earnings raised optimism about the economy in the oil markets, outweighing weak fundamentals. [ID:nSYD166659]
U.S. crude for November delivery
"We have been tagging along with equities," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut. "It comes down to whether or not the fundamentals underlying the oil market itself can justify holding that level."
Investors bet the Federal Reserve will hold U.S. interest rates near zero well into the coming year, putting a damper on the dollar. [ID:nN19393306]
The dollar was down against a basket of major currencies, with the U.S. Dollar Index <.DXY> off 0.45 percent at 75.260.
The euro
"The dollar remains a victim of U.S. fiscal and monetary policies," said Andrew Bekoff, chief investment officer for Family Office Group in New York. "The current Federal Reserve policy remains accommodating. This serves to keep rates low and spending by the government high."
Long-dated U.S. Treasuries found favor with investors after fresh weakness emerged in a home builders' sentiment index and as talk persisted about the eventual tapering off of a monetary easing policy. [ID:nN19568434]
"The dip in home builders' sentiment added to the collection of anecdotal evidence suggesting that the economic recovery is not off and running," said Chris Rupkey, chief financial economist at Bank of Tokyo/Mitsubishi UFJ in New York.
Benchmark 10-year Treasury notes
The benchmark MSCI index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> was up 0.5 percent, just off a 14-month peak that was reached last week. Japan's Nikkei average <.N225> edged down 0.2 percent. (To read Reuters Global Investing blog, click on http://blogs.reuters.com/globalinvesting. For the MacroScope blog, click on http://blogs.reuters.com/macroscope. For Hedge Fund blog, click on http://blogs.reuters.com/hedgehub) (Reporting by Rodrigo Campos, Nick Olivari, Chris Reese in New York; Chris Baldwin, Jon Hopkins and Emelia Sithole-Matarise in London; Writing by Herbert Lash; Editing by Jan Paschal)