U.S. Stocks Rise as Technology Shares Rally, Banks Reverse Losses on FDIC

U.S. stocks advanced, led by technology companies, as the government’s list of “problem” banks declined for the first time since 2006 and investors speculated the Federal Reserve will act to spur the economy.

Cisco Systems Inc. (CSCO) and Microsoft Corp. (MSFT) added at least 2 percent, leading technology shares to the biggest gain in the Standard & Poor’s 500 Index within 10 groups. Bank of America dropped 3.7 percent as the cost to protect it against default climbed to a record. Financial shares in the S&P 500 reversed losses, rising 0.6 percent, after the Federal Deposit Insurance Corp.’s list of “problem” banks fell in the second quarter, the first drop since 2006, as the cost for bad loans eased.

The S&P 500 rose 1.1 percent to 1,136.61 at 10:08 a.m. in New York, after falling 0.1 percent. The Dow Jones Industrial Average added 123.82 points, or 1.1 percent, to 10,978,47.

Central bankers from around the world meet this week in Jackson Hole, Wyoming, for a conference that last year resulted in Bernanke signaling a second round of asset purchases that buoyed asset markets. The S&P 500 rose 28 percent between Aug. 26, 2010, and Feb. 18 after Bernanke foreshadowed a $600 billion bond-purchase program a year ago in Jackson Hole.

Fed Chairman Ben S. Bernanke “probably feels some pressure from the stock market to respond in some fashion,” Howard F. Ward, a money manager at Mario Gabelli’s Gamco Investors Inc., said on Bloomberg Television’s “InsideTrack” with Deirdre Bolton and Erik Schatzker. “He should lay out a game plan of what he can do should the economic outlook warrant that.”

Financial institutions in the S&P 500 have tumbled 25 percent in 2011, the most among 10 groups, amid speculation the government debt crisis in Europe will spur banking losses. The industry has the second-biggest weighting in the benchmark measure of U.S. shares at 14 percent. Bank of America sank 52 percent this year, the most since 2008, through yesterday.

A four-week global equity rout has wiped about $8 trillion from companies’ market value as Europe’s sovereign debt-crisis and worsening economic reports in the U.S. raised concern the global economic recovery is faltering. The S&P 500 fell 16 percent from July 22 through the end of last week and its members trade at an average 11.3 times estimated earnings, near the lowest level since March 2009.