Wall Street jumps as tech, bank stocks rally

By Tanya Agrawal

REUTERS - The S&P 500 and the Dow Jones industrial average hit their highest in seven sessions on Tuesday, while the Nasdaq closed in on a one-month high as technology and financial stocks rallied.

Banking stocks got a big boost as investors speculated on the possibility of a June interest rate hike.

Bank of America and JPMorgan were up more than 1.5 percent, while Citigroup jumped 2.2 percent.

Microsoft was up 2.9 percent and provided the biggest boost to the Nasdaq and S&P 500, while Goldman Sachs' 1.4 percent rise lifted the Dow.

Minutes of the Federal Reserve's April meeting released last week suggested a June rate hike had not been ruled out, surprising investors who had thought the Fed would stand pat until the end of the year.

"I think investors are becoming more comfortable with an early rate hike because even if the Fed does raise rates in June, it will remain extremely accommodative," said Art Hogan, chief market strategist at Wunderlich Securities in New York.

"I think the Fed wants to recalibrate the market's expectations regarding a hike."

Several Fed officials struck hawkish tones in separate speeches on Monday, calling for two-three rate hikes in 2016 if supported by economic data.

Fed Chair Janet Yellen speaks on Friday.

Traders are now pricing in a 39 percent chance of a June hike, up from 4 percent last week, as inflation creeps towards the Fed's 2 percent target rate and the labor market strengthens.

Data on Tuesday showed new U.S. single-family home sales surged to a more than eight-year high in April and prices hit a record high, offering further evidence of a pick-up in economic growth.

The Philadelphia Housing Index climbed to a one-month high after the data.

At 12:38 p.m. ET (1638 GMT) the Dow was up 204.46 points, or 1.17 percent, at 17,697.39, the S&P 500 index was up 25.65 points, or 1.25 percent, at 2,073.69 and the Nasdaq composite index was up 81.53 points, or 1.71 percent, at 4,847.31.

The S&P rose above its 50-day moving average for the first time in four days. The index has not closed above the closely watched metric in almost two weeks.

The gains were broad-based, with all 10 S&P sectors in the black. The technology index's 1.84 percent rise led the advance.

Oil reversed early losses to turn positive, as investors awaited crude oil inventory data from the United States that was expected to show a shrinking supply overhang.

Toll Brothers shares were up 8 percent at $29.26 as the company's quarterly revenue beat expectations.

Herbalife Ltd jumped as much as 8.5 percent amid conflicting reports on whether the company had reached an agreement in principle with the U.S. Federal Trade Commission to settle a probe into whether it runs a pyramid scheme.

Twitter fell as much as 4.8 percent to a record low at $13.72 after brokerage MoffetNathanson downgraded the company's stock to "sell" from "neutral".

Advancing issues outnumbered decliners on the NYSE by 2,263 to 687. On the Nasdaq, 2,100 issues rose and 596 fell.

The S&P 500 index showed 25 new 52-week highs and one new low, while the Nasdaq recorded 75 new highs and 23 new lows.

(Reporting by Tanya Agrawal; Editing by Anil D'Silva)