* Fed dents hopes of stimulus reduction in coming months
* Dollar hits 3-week low vs euro, 2-week low vs yen
* BOJ holds rates, sounds optimistic on economy

By Wanfeng Zhou
July 11 (Reuters) - The U.S. dollar fell to multi-week lows
against the euro and yen on Thursday as traders scaled back
expectations that the Federal Reserve will slow its asset
purchases in the coming months.
Fed Chairman Ben Bernanke said on Wednesday the U.S. central
bank would continue its accommodative monetary policy because of
low inflation and weakness in the labor market.
Investors had driven the dollar to three-year peaks against
a basket of currencies this week on bets the Fed will start
reducing its stimulus as early as September. The Fed's $85
billion monthly bond-buying has pressured the dollar because it
is tantamount to printing money.
" The dramatic drop in the dollar highlights how one-sided
the market had become and how quickly traders raced to close out
long dollar positions," said Camilla Sutton, chief foreign
exchange strategist at Scotiabank in Toronto.
Minutes of the Fed's June meeting, released Wednesday, also
supported the view of the Fed keeping the status quo for longer,
with many policymakers wanting reassurance the U.S. jobs
recovery was on solid ground before any policy retreat.

The euro rose 0.9 percent to $1.3095, having climbed
to $1.3201, according to Reuters data, its strongest since June
21.
The euro zone common currency has been under pressure as the
European Central Bank last week clearly indicated it would keep
interest rates low for an " extended period." ECB policymaker
Jens Weidmann, however, said Thursday the central bank could
hike rates if inflationary pressures re-emerged.
The dollar lost 0.8 percent to 98.88 yen after
hitting a two-week low of 98.27 yen. Chartists said a weekly
close above 98.75 in dollar/yen would be a signal that the
dollar is retaining its upward bias.
The dollar extended losses against the yen after the Bank of
Japan kept its policy on hold and made its most upbeat
assessment in two and a half years. But analysts said the fall
in the pair was likely to be short-lived.
The dollar index, which tracks the greenback against
a basket of six currencies, fell 1.6 percent to 82.712. It had
hit 82.418, its lowest since June 25, retreating further from a
three-year high of 84.753 touched on Tuesday.
In data released on Thursday, U.S. jobless claims showed the
number of Americans filing new claims for unemployment benefits
rose last week, although the level still pointed to healing in
the job market.
Separate U.S. data showed prices for imports and exports
fell in June for a fourth straight month, a sign of cooler
economic growth worldwide that could weigh on the American
economy and unnerve policymakers.
Despite the sell-off, analysts said the dollar remains
poised to gain further against most major currencies.
Debates in the United States have focused on the timing of a
reduction of central bank stimulus. In contrast, central banks
in the euro zone, UK and Japan remain biased for further easing.
Strategists at Citigroup said the dollar's weakness in
response to Bernanke and the Fed minutes may look overdone
relative to the moves in other currencies.
" We suspect that drivers like market-long dollar positioning
may have played a role," they wrote to clients. " Despite Fed's
cautiousness last night, the U.S. growth story is still the most
compelling in G4. The U.S. cyclical leadership will continue to
support the dollar and U.S. Treasury yields in our view."
The dollar's moves have been highly correlated to Treasury
yields, which move inversely to price. Treasuries, as well as
stocks, rallied on the perceived dovish comments from Bernanke.
Any push back in the timeline of Fed tapering will probably
put downward pressure on yields and the dollar in the near term.
China supports U.S. plans to end its loose monetary policy
as conditions permit, but urges Washington to weigh the impact
on the global economy of its exit from so-called quantitative
easing, Finance Minister Lou Jiwei said on Thursday on the
sidelines of annual U.S.-China economic talks.

(Corrects Wednesday yen rate in paragraph 12 to 101.21 from 121.21)

  * USD consolidating around $1.3090 per euro, 98.90 yen

  * Speed of retreat leaves USD bulls chastened for now

  * Asia turns cautious ahead of Chinese growth data

  By Wayne Cole

  SYDNEY, July 12 (Reuters) - The U.S. dollar was quietly nursing its losses on Friday as the smoke cleared after a couple of sessions of wild action that left markets hoping for a bit of calm and consolidation.

  The general sentiment was still that the Federal Reserve was likely to start winding back on stimulus before any other major central bank, and so underpin the dollar over the long term.

  But after some of the fastest falls seen in years, investors could be more cautious about piling into long positions - making the dollar's uptrend less of a one-way bet.

  " It's going to be more of a zig-zag than a straight line," said a dealer at an Australian bank in Sydney. " The fact that Bernanke could sink the dollar with just a few well-chosen words was a warning to bulls not to get too carried away here."

  Fed Chairman Ben Bernanke sparked the rout late Wednesday when he emphasised that stimulus was still needed given low inflation and weakness in the labour market, and pledged to push back against any unwarranted tightening in financial markets.

  The dollar index, which tracks it against a basket of six currencies, flattened out at 82.755 on Friday, after diving all the way from a three-year high of 84.753 touched on Tuesday.

  The euro was camped at $1.3091, having been as high as $1.3201 the previous session. That left its gains since late Wednesday at 2.5 percent, the biggest two-day jump since 2011.

  Support was now seen at $1.3005/10, with talk of stop-loss sell orders under there, while resistance lined up at $1.3123.

  Analysts at JPMorgan noted the impulsive nature of the dollar's retreat had muddied the technical waters for the currency and increased risk of a deeper pullback.

  " As short-term momentum studies have yet to fully unwind the overbought setup for the dollar, additional follow-through seems likely in line with the impulsive reversals," they said in a note to clients.

  " Moreover, closes around current levels today should confirm bearish USD weekly reversal patterns for most G10 pairs."

  The dollar did find a ledge of support against the yen at 98.90, after falling from 101.21 on Wednesday to as far as 98.27. Support was seen at 98.15 with resistance at 99.51.

  While markets hail the U.S. economic recovery, it is Japan that is actually outperforming, with a string of strong numbers recently. The IMF this week revised up its forecast for Japanese growth to 2 percent for this year, even as it again trimmed the global outlook.

  These are still very early days in the Bank of Japan's grand experiment in reflation and it remains firmly committed to massive stimulus for many months to come.

  Dealers emphasised that the huge trading range on the dollar in recent days had taken out orders and stops on both sides, leaving desks with little in the books for the near term.

  Japan was also heading into a holiday weekend and caution was high ahead of a key reading on the Chinese economy due on Monday.

  Median forecasts are that growth in gross domestic product (GDP) slowed modestly to 7.5 percent in the second quarter , but many see risks to the downside after a run of soft numbers.

  Apprehension of a nasty surprise was one reason the Australian dollar ran into selling in New York on Thursday which saw it recoil to $0.9168, from a $0.9306 peak.

  China is Australia's single biggest export market and the Aussie is often sold as a liquid proxy when investors want to hedge against weakness there. (Editing by Eric Meijer and Paul Tait)

* Nikkei gains 0.4 pct, Topix up 0.7 pct
* Global risk-on mood underpins market after the Fed chief's
dovish remarks
* Heavyweight Fast Retailing sinks

By Tomo Uetake
TOKYO, July 12 (Reuters) - Japan's Nikkei average edged up
to a seven-week high on Friday morning, buoyed by a record
finish on Wall Street but a sharp slide in heavyweight Fast
Retailing weighed on the broader market.
The benchmark Nikkei rose 0.4 percent to 14,530.56, a level
not seen since May 24, in midmorning trade, after moving in and
out of positive territory in the last hour.
The broader Topix advanced 0.7 percent to 1,203.62.
Federal Reserve Chairman Ben Bernanke's reassurance this
week that the central bank will maintain its ultra-easy monetary
policy for the foreseeable future has helped to calm investors
worried about reduced liquidity, which has been a key driver of
the recent global stock market rally.
Fast Retailing tumbled 6.1 percent to a one-week
low after Asia's biggest retailer disappointed investors by
leaving its profit forecast for the year to August unchanged.

The stock contributed 83 negative points to the Nikkei and
was the second-most traded on the main board by turnover.
" Although investors are cautiously watching foreign exchange
and Asian stock markets, the global risk-on mood is supporting
the market," said Mitsushige Akino, chief fund manager at
Ichiyoshi Asset Management.
" If the Nikkei can absorb the loss made by Fast Retailing
today, I think the index may rise toward 15,000 next week ahead
of the upper house election."
Wall Street closed at record highs on Thursday as investors
took comfort from Bernanke's comments that the U.S. central bank
will keep a loose monetary policy for some time to lower the
unemployment rate.
On the day, the pause in the yen's rebound against the
dollar also buoyed some exporters. Toyota Motor
advanced 1.3 percent, while Nikon Corp and Daikin
Industries rose 3 percent and 2.2 percent,
respectively.
The yen was quoted at 99.14 yen to the dollar in
early Asian trade on Friday, according to EBS data, after rising
to a two-week high of 98.20 yen on Thursday.
The Japanese equity market has seen volatile trading in
recent sessions on worries about slowing growth in China and the
prospect of the Fed reducing its bond-buying programme in coming
months. Still, the Nikkei is up 40 percent this year, boosted by
the Japanese government's sweeping stimulus aimed at pulling the
world's third-biggest economy from two decades of stagnation.

* FTSEurofirst 300 up 0.6 pct, hits 5-week high

  * EuroSTOXX 50 closes June's bearish gap

  * SocGen recommends European large caps in case Fed tapers

  * Portuguese stocks hit by renewed political uncertainty

  By Toni Vorobyova

  LONDON, July 11 (Reuters) - European shares hit five-week highs on Thursday and broke above technical resistance to pave the way for further gains after the U.S. Federal Reserve allayed market concerns of an imminent start to its stimulus withdrawal.

  Growth-sensitive stocks like miners took comfort from Fed chairman Ben Bernanke's pronouncement on Wednesday that a highly accommodative policy was needed for the " foreseeable future" .

  The FTSEurofirst provisionally closed up 0.6 percent at 1,196.86 points, moving firmly above its 100-day moving average as gold miners like Fresnillo and Randgold rallied in tandem with metal prices .

  Although many still expect the U.S. central bank to begin trimming bond purchases as soon as September, Bernanke affirmed that it will only consider such a move if the economy picks up.

  " They're trying to remind the market that tapering is data-dependent - they're not going to remove it unless the economy improves. So you want the Fed to taper," said Andrew Goldberg, global market strategist at JPMorgan Asset Management.

  In a further upbeat technical signal, the EuroSTOXX 50 gained 0.8 percent to 2,681.32 points, closing a bearish gap opened in early June, when the Fed first officially raised the possibility of reduced stimulus.

  " What the Fed is trying to do is bring forward as much of that volatility as possible now, by talking about it and getting the market focused on it ... They don't want to swing it out of the blue and suddenly shock the market," said Derry Pickford, macro strategist at investment management firm Ashburton.

  " There absolutely was an over-reaction (in June) ... I think the markets are completely positioned for that tapering now."

  Underscoring the shift in the market's attitude, European equities trimmed some of their gains in afternoon trade after news of a pick-up in U.S. weekly jobless claims.

  JPMorgan Asset Management recommended investors focus on cyclical sectors that will benefit if the economy improves.

  Societe Generale suggested positioning for an autumn pick-up in implied volatility and forecast European stocks, especially large caps, would outperform U.S. peers.

  " Fed tapering will cause U.S. yields to rise faster than those of the euro zone, which should strengthen the dollar," SocGen's analysts wrote in a note. " This will benefit euro zone stocks in general but will be of particular benefit to companies with large exposure to the U.S. or dollar."

  But euro zone political jitters could still cast a cloud over the region's stock market prospects. Portugal's blue-chip index fell 2 percent on Thursday after the president rejected a plan to heal a government rift, raising the prospect of early elections as the country tries to exit its EU bailout.

FRANKFURT, July 12 (Reuters) - The euro zone is likely to see an extended period of slow economic growth and European Central Bank's policy will have to stay loose for a long time, ECB Vice-President Vitor Constancio said on Friday.

  Constancio, in the text of a speech to be given in Singapore, also criticised the European Commission's proposal for shutting down failing banks, saying that the planned authority should be given access to a public credit line.

  " Advanced economies, Europe in particular, face a long period of slow growth that will test the quality of our institutions," Constancio told the Official Monetary and Financial Institutions Forum event, according to the text.

  " The euro area is still facing a painful crisis of imbalances, financial fragmentation and low growth."

  Constancio said the ECB's step in providing forward guidance about interest rates last week - abandoning its customary insistence that it never precommits on policy - had been successful in stabilising financial markets after the U.S. Federal Reserve indicated it would slow its asset purchases.

  He said the ECB would not exit from crisis measures yet.

  " Europe is behind the U.S. in economic recovery and inflation risks, which implies that monetary policy has to stay accommodative for a longer period of time," he said, adding that forward guidance was conditional on economic data.

  Constancio said that while euro zone banks still faced headwinds, they were in better shape than commonly acknowledged, and their situation would improve with the planned banking union.

  While he for the most part welcomed the European Commission's proposal on bank resolution, Constancio said he would have preferred it having access to a public backstop.

  The new authority is supposed to wind down or revamp banks in trouble. It is the second pillar of a " banking union" meant to galvanise the euro zone's response to the crisis.

  If agreed by European Union states, the agency will be set up in 2015 and will eventually have the means to impose losses on creditors of a stricken bank, according to the blueprint.

  Officials foresee tapping banks to build a war chest of 55 to 70 billion euros but that is expected to take a decade, leaving the agency largely dependent on national schemes in the meantime.

  " I would have preferred, however, that the proposal would have considered explicitly the issue of a public backstop for the resolution fund in the form of a credit line that would have to be repaid afterwards," Constancio said.

TOKYO, July 12 (Reuters) - U.S. crude futures extended falls toward $104 a barrel on Friday, weighed down by profit-taking after hitting a 15-month high above $107 a day earlier, though still on course for a third weekly gain.

  FUNDAMENTALS

  * NYMEX crude for August delivery was down 46 cents at $104.45 a barrel by 0016 GMT. It settled down $1.61 at $104.91 on Thursday, pressured by a temporary closure of the Seaway pipeline that ships crude from Cushing to the Gulf Coast. Flows on the Seaway pipeline have resumed.

  U.S. oil gave up about $2 of the $2.99 jump recorded on Wednesday after government data showed the biggest two-week decline on record in U.S. crude stockpiles. But it is still set for a third-weekly gain of about 1 percent.

  * London Brent crude for August delivery was down 41 cents at $107.32 a barrel, after settling down 78 cents at $107.73.

  * Also adding pressure was the closure of one of two small crude distillation units for a planned overhaul at BP's 405,000 barrel per day (bpd) Whiting, Indiana, refinery, which will reduce inland crude oil demand.

  * The North American shale oil boom could spur the biggest rise in non-OPEC supply growth in decades next year, helping meet strong global demand and eroding the market share of OPEC countries, the International Energy Agency (IEA) said on Thursday.

  MARKETS NEWS

  * U.S. stocks closed at record highs on Thursday. The Dow Jones industrial average rose 169.26 points or 1.11 percent, to 15,460.92. The S& P 500 gained 22.4 points or 1.36 percent, to 1,675.02

  * The U.S. dollar fell to multi-week lows against the euro and yen on Thursday as traders scaled back expectations that the Federal Reserve will slow its asset purchases in the coming months.

  DATA/EVENTS

  * The following data is expected on Friday: (Time in GMT)

  - 0900 Euro zone Industrial production

  - 1230 U.S. Producer prices

  - 1355 U.S. Univ of Michigan consumer sentiment (Reporting by Osamu Tsukimori Editing by Ed Davies)

By Yasmine Saleh and Mike Collett-White

  CAIRO (Reuters) - Supporters of ousted President Mohamed Mursi called for protests on Friday, and Egyptians prayed there would be no repeat of clashes that killed more than 90 people in the last week and left the Arab world's biggest nation bitterly divided.

  Mursi's Muslim Brotherhood movement wants people to join it on the streets to push for Egypt's first freely elected leader to be reinstated, an aim that now seems in vain.

  Officials say Mursi is still being held at the Republican Guard compound in Cairo, where troops killed 53 Islamist protesters on Monday in a clash that intensified anger his allies already felt at the military's decision to oust him.

  Four soldiers were also killed in a battle the military says was started by terrorists. Mursi's supporters say those who died were praying peacefully when troops opened fire.

  Egypt's 84 million people have been shocked by the shootings, graphic images of which have appeared on state and private news channels and social media.

  The incident came just three days after 35 people were killed in clashes between pro- and anti-Mursi demonstrators across the country.

  " It's a very hard time for Egyptians, to see footage of blood and violence during the holy month of Ramadan, and everyone I speak to says the same thing," said Fateh Ali, a 54-year-old civil servant in Cairo.

  " I really hope the situation gets resolved soon. I don't think we can afford this economically or psychologically."

  The Brotherhood believes it is the victim of a brutal military crackdown, evoking memories of when it was suppressed under longtime autocratic leader Hosni Mubarak. He was toppled in a popular uprising in 2011.

  But many of its opponents blame Islamists for the violence, and some have little sympathy for demonstrators who died, underlining how deep the fissures in Egyptian society are.

  VIGIL, SONGS FOR THE DEAD

  Outside the Rabaa Adawiya mosque in northeastern Cairo, thousands of Brotherhood supporters gathered to mourn the dead in Monday's attack.

  Women wailed and men cried as they watched a large screen showing graphic footage of hospital scenes immediately after the shooting, with corpses on the floor and medics struggling to cope with the number of bloodied casualties being carried in.

  Hundreds of Egyptian flags fluttered in the evening breeze. Songs of defiance were sung.

  Many thousands of Islamists have camped out in the area, braving searing heat and, since Wednesday, daytime fasting during Ramadan.

  It has become the de facto base of the Brotherhood, whose leaders live under the threat of detention after the public prosecutor ordered their arrests earlier in the week.

  Judicial sources say authorities are expected to charge Mursi in the coming days, although it is not clear for what.

  The detentions and threats of arrest have drawn criticism from the United States, which has walked a diplomatic tightrope to avoid calling Mursi's ouster at the hands of the powerful Egyptian military a coup.

  U.S. law bars aid to countries where a democratic government is removed in a coup. Washington, which gives Egypt's military $1.3 billion (856.2 million pounds) in aid each year, has said it is too early to say whether the Egyptian events meet that description.

  The Egyptian army said it was enforcing the nation's will after millions of people, fed up at economic stagnation and suspicious of a Brotherhood power grab, took to the streets at the end of June to demand his resignation.

  State Department spokeswoman Jen Psaki said on Wednesday Mursi's government " wasn't a democratic rule."

  Her words were warmly received by the interim government and swiftly denounced by the Brotherhood. But on Thursday, Psaki expressed concern over the crackdown on Brotherhood leaders.

  " If politicised arrests and detentions continue, it is hard to see how Egypt will move beyond this crisis," she told a daily briefing on Thursday.

  ALARM OVERSEAS

  Underlining the level of concern overseas at Egypt's crisis, two U.S. Navy ships patrolling in the Middle East moved closer to Egypt's Red Sea coast in recent days, in what appeared to be a precautionary move following Mursi's ouster on July 3.

  The United States often sends Navy vessels close to countries in turmoil in case it needs to protect or evacuate U.S. citizens or give humanitarian assistance. Their presence does not mean it is preparing for military action.

  Rich Gulf states have thrown Egypt a $12 billion lifeline in financial aid, which should help it stave off economic collapse.

  More than two years of turmoil has scared away tourists and investors, shrivelled hard currency reserves and threatened its ability to import food and fuel.

  Speaking to Reuters in a tent at a vigil by thousands of Mursi supporters, the ousted president's supply minister, Bassem Ouda, revealed that government stocks held just 500,000 tonnes of imported wheat, less than two months' supply.

  Crucial to longer-term stability will be holding new parliamentary and presidential elections, which the transitional authorities are hoping to achieve in a matter of months.

  Adli Mansour, the interim president named by the general who removed Mursi, has announced a temporary constitution, plans to amend it to satisfy parties' demands and a faster-than-expected schedule for parliamentary elections in about six months.

  He also has named liberal economist Hazem el-Beblawi as interim prime minister. Beblawi held his first meetings with political leaders on Wednesday and told Reuters that he expected the transitional Cabinet to be in place early next week.

  Negotiations are difficult, with the authorities trying to attract support from groups that range from secularists to ultra-orthodox Muslims, nearly all of whom expressed deep dissatisfaction with elements of the interim constitution.

  (Additional reporting by Alexander Dziadosz, Maggie Fick, Sarah McFarlane, Mike Collett-White, Tom Perry, Peter Graff, Ali Saed, Seham el-Oraby, Shadia Nasralla and Tom Finn in Cairo and Andrea Shalal-Esa and Lesley Wroughton in Washington Writing by Mike Collett-White Editing by Xavier Briand)

HONG KONG, July 12 (Reuters) - Hong Kong shares could start higher on Friday, tracking Wall Street gains after Federal Reserve Chairman Ben Bernanke said the U.S. central bank will keep a loose monetary policy for some time to lower the unemployment rate.

  On Thursday, the Hang Seng Index climbed 2.6 percent to 21,353.7 points in its biggest daily gain since Jan. 2. The China Enterprises Index of the top Chinese listings in Hong Kong surged 3.7 percent. On the week, they are now up 2.8 and 3.7 percent, respectively.

  Elsewhere in Asia, Japan's Nikkei was flat, while South Korea's KOSPI was down 0.5 percent at 0051 GMT.

  FACTORS TO WATCH:

  * Lenovo Group Ltd, the world's top PC vendor, has no plans to issue bonds in the near term because it has sufficient cash in hand and because of the volatility in global markets, its chief financial officer said.

  * A court has granted a unit of China Rongsheng Heavy Industries approval to proceed with legal action to reclaim a 630 million yuan ($103 million) security deposit a week after China's biggest private shipbuilder asked for financial help.

  * Eight more cities in China, the world's biggest auto market, are likely to announce policies restricting new vehicle purchases, an official at the automakers association said, as Beijing tries to control air pollution.

  * China's banking regulator is considering including three foreign banks among a list of two dozen domestic banks that could be permitted to trade in a new government bond futures pilot programme expected to be launched in September, three sources with direct knowledge of the matter said.

  * Sa Sa International Holdings Ltd recorded a year-on-year increase of 20.1 percent in turnover and 17 percent increase in same store sales growth, due to growing demand for cosmetics products and strengthened penetration in non-traditional tourist areas.

  * Belle International Holdings Ltd said its net increase in the total number of retail outlets in mainland China was 426 as at 30 June 2013, while it recorded a 0.5 percent increase in same store sales growth for footwear business and 2.5 percent growth for sportswear business.

  * Daphne International Holdings Ltd recorded a 13.7 percent year-on-year decline in same-store sales for the second quarter ended 30 June 2013 due to weak consumer sentiment and poor weather.

  * Asia Cement (China) Holdings Corporation is expected to record an increase of more than 100 percent year-on-year in unaudited net profit for the six months ended 30 June 2013 due to increase in sales volume and the decrease in coal cost compared with last year.(Reporting by Yimou Lee Editing by Eric Meijer)

*  Dow, S& P 500 close at record highs

  *  Bernanke comments ease fears of stimulus cuts

  *  AMD jumps, semiconductors at highest in six years

  *  RadioShack tumbles after report

  *  Indexes up: Dow 1.1 pct, S& P 1.4 pct, Nasdaq 1.6 pct

  *

  By Rodrigo Campos

  NEW YORK, July 11 (Reuters) - The S& P 500 index and the Dow industrials closed on Thursday at record highs, a day after Federal Reserve Chairman Ben Bernanke said the U.S. central bank will keep a loose monetary policy for some time to lower the unemployment rate.

  Bernanke said after the market's close on Wednesday the U.S. jobless rate of 7.6 percent overstated the health of the labor market. He said a " highly accommodative" policy is needed for the foreseeable future, triggering a rally in equity futures.

  The S& P closed above its previous all-time high of 1,669.16 on May 21 and the Dow surpassed its high of 15,409.39 on May 28.

  " Having Bernanke come out obviously worked, giving the market some stability," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.

  " It's almost as if the markets need to hear this over and over again."

  After closing at its previous record, the S& P 500 in June posted its first negative month in eight as Bernanke hinted the U.S. central bank could begin this year to wind down a bond buying program partly responsible for the rally in stocks.

  " The selling that we saw after May 22 was clearly the unwinding of leveraged bets which put tremendous pressure on markets," Krosby said.

  More than 85 percent of shares on the New York Stock Exchange and almost 70 percent of those on the Nasdaq rose on Thursday. All 10 of the S& P 500 industry sectors advanced, with five of them rising more than 1.5 percent.

  The Dow Jones industrial average rose 169.26 points or 1.11 percent, to 15,460.92. The S& P 500 gained 22.4 points or 1.36 percent, to 1,675.02 and the Nasdaq Composite added 57.55 points or 1.63 percent, to 3,578.3.

  In late June, the S& P had fallen as much as 5.8 percent from its closing high after Bernanke's comments and the expectation of a winding down of the stimulus. Gains have come from improving economic data, anticipation of a better-than-expected earnings season and reduced concern about cuts to the Fed's $85 billion in monthly bond purchases.

  Bernanke's remarks calmed concerns in the Treasuries market, and stock investors flocked to housing-related stocks on bets on a decline in mortgage rates.

  The PHLX housing index jumped 4.9 percent, its largest daily gain since Dec. 20, 2011.

  D.R. Horton jumped 9.2 percent to $22.98 and at least six other homebuilder stocks rose 7 percent or more.

  Advanced Micro Devices Inc jumped 11.8 percent to $4.45 and was the S& P 500's top performer after Bank of America Merrill Lynch upgraded the stock. The PHLX semiconductor index rose 2.1 percent to its highest in almost six years.

  Celgene Corp, up 7.9 percent to $134.90, was among the top performers for both the S& P 500 and the Nasdaq 100 after the company said a late-stage trial of a cancer drug met the main goal of improving survival in newly diagnosed blood cancer patients.

  Microsoft rose 2.8 percent to $35.69 after the company announced a reorganization designed to streamline the software company's operations.

  RadioShack Corp fell as much as 22.6 percent after trade publication, Debtwire, reported the electronics chain is considering hiring a financial adviser to help improve its finances. Shares closed down 7.1 percent at $2.63.

  Earnings reports are expected on Friday from JPMorgan Chase& Co and Wells Fargo.

  Thomson Reuters data show analysts expect S& P 500 companies' second-quarter earnings to have grown 2.5 percent from a year earlier, with revenue up 1.5 percent.

  About 6.5 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, slightly above the 6.4 billion daily average so far this year.