Reuters Wall St rallies on banks, data; S and P positive for '09

NEW YORK (Reuters) - U.S. stocks rallied on Monday, driving the S&P 500 into positive territory for the year as investors bet banks' capital shortfalls may be manageable and housing data fueled hopes the recession is easing.

Bank stocks were the standouts, with Citigroup (C.N) up 7.7 percent at $3.20 and Bank of America (BAC.N) climbing 19.3 percent to $10.38. Wells Fargo (WFC.N) jumped 23.7 percent to $24.25, while JPMorgan (JPM.N) shot up 10.2 percent to $35.79.

The S&P 500 is now up 34 percent from its 12-year closing low on March 9. The KBW Bank index .BKX leaped nearly 15 percent and is up 88 percent since early March when many thought the government was on the brink of nationalizing several big banks.

Aside from reports suggesting bank balance sheets need less shoring up than feared just a few months ago, White House comments that the Obama administration did not see a need right now to ask Congress for more bank bailouts also pushed the sector higher.

"Going into the stress tests, nobody expected anything positive to come out of this," said Dan Faretta, senior market strategist at Lind-Waldock, a retail brokerage firm, in Chicago.

"If there's a situation where we don't have to ask for more money, that's going to be very positive for these markets."

The Dow Jones industrial average .DJI rose 214.33 points, or 2.61 percent, to 8,426.74. The Standard & Poor's 500 Index .SPX gained 29.72 points, or 3.39 percent, to 907.24 -- its first close above the 900 level since early January. The Nasdaq Composite Index .IXIC climbed 44.36 points, or 2.58 percent, to 1,763.56.

The broad S&P 500 turned positive for the year 2009, but it is still off 42 percent from its October 2007 record high.

All but one of the Dow's 30 stocks ended in positive territory.

Although final stress test results are expected to be released on Thursday, investors bet they will show banks do not need a larger financial cushion. That outcome would minimize the dilution of current shareholders' equity and avoid giving the government a bigger stake in the banks.

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