* Automaker's shares jump 7 percent on first day of return
* Optimism over Ireland debt deal sparks broad rally
* CBOE Volatility index falls below 20
* Dow up 1.6 pct, S&P up 1.7 pct, Nasdaq up 1.8 pct (Updates to midday; changes byline)
By Angela Moon
NEW YORK, Nov 18 (Reuters) - Wall Street stocks rallied on Thursday on expectations for a solution to Ireland's debt crisis and strong gains by General Motors after its landmark initial public offering.
General Motors Co shares gained 7 percent to $35.27 in the debut of its IPO, the biggest in U.S. history. Trading in the Detroit automaker's shares accounted for nearly 8 percent of composite volume, according to Thomson Reuters data.
"This is bigger than just an IPO. It's an American icon coming back on stream and it is feeding optimism to the stock market," said Bernie McGinn, president of McGinn Investment Management in Alexandria, Virginia.
The Dow Jones industrial average was up 173.54 points, or 1.58 percent, at 11,181.42. The Standard & Poor's 500 Index was up 19.51 points, or 1.66 percent, at 1,198.10. The Nasdaq Composite Index was up 43.81 points, or 1.77 percent, at 2,519.82.
Ireland's central bank chief expected the country to receive tens of billions of euros in loans from European partners and the International Monetary Fund to help shore up its shattered banks and stabilize the economy..
U.S.-listed shares of Bank of Ireland climbed 11 percent to $2.39, while the FTSEurofirst 300 index of top European shares was up 1.3 percent.
Relief over Ireland prompted a broad U.S. rally, with most S&P sectors gaining more than 1 percent.
The S&P materials index was up 2.6 percent, while the financials index climbed 1.8 percent.
The S&P Industrials index also rose 2 percent as GM's advance boosted shares of other automakers and auto suppliers.
Markets have fallen recently on concerns that unless Ireland received a bailout, problems in other heavily indebted euro zone members were more likely to spread, hindering global recovery. The S&P 500 slipped nearly 4 percent since Nov. 5.
"The fear was what would happen if Ireland were to go down, what reverberations and aftershocks we were going to see," said Paul Larson, equities strategist at Morningstar in Chicago.
"What this does is to steady that first domino."
The CBOE Volatility index VIX, Wall Street's so-called fear gauge, fell 11.72 percent to 19.21 after staying above 20 for most of the week.
In economic news, initial jobless claims rose less than expected in the latest week, while factory activity in the U.S. mid-Atlantic region grew much more than forecast and a gauge of future U.S. economic activity rose solidly in October. and
On the downside, Sears Holding Corp fell 6 percent to $62.24 after its quarterly loss widened and sales fell. (Reporting by Angela Moon, Editing by Kenneth Barry)