Computer-related shares posted the biggest gain in seven weeks after Seagate Technology, the world's largest maker of hard-disk drives, boosted its profit and revenue forecast. Exxon Mobil Corp. led 31 of 32 energy companies in the S&P 500 higher after crude oil prices reached a two-week high.
The S&P 500 added 28.8, or 2 percent, to 1,461.16 as of 3:46 p.m. in New York. The Dow Jones Industrial Average increased 234.68, or 1.8 percent, to 13,276.53. The Nasdaq Composite Index rose 58.7, or 2.4 percent, to 2559.34.
Financial shares rallied as traders increased wagers that the Federal Reserve will reduce its benchmark lending rate by 0.5 percentage point at its next policy meeting in September. The S&P 500 dropped 2.4 percent yesterday on weaker consumer confidence and speculation tighter credit markets will hurt bank earnings.
"There are a lot of good opportunities in the market right now,'' said Joseph Keating, who helps manage about $3 billion as chief investment officer at First American Asset Management in Birmingham, Alabama. ``Investors need to be stepping up to the plate.''
All 10 industry groups in the S&P 500 advanced, with 473 of the index's members posting gains.
Fed funds futures contracts today showed traders see a 42 percent chance the Fed will lower its target for overnight bank lending to 4.75 percent from 5.25 percent at its next meeting on Sept. 18, up from 36 percent odds yesterday.