US SMALL/MIDCAPS-Stocks rise on ECB bond target news

NEW YORK Aug 24 (Reuters) - Mid- and smallcap stocks rose on Friday alongside other equity markets on news that the European Central Bank is considering setting bond market targets in an effort to curb the bloc's debt crisis.

The program, which would allow the ECB to prevent borrowing costs in countries like Spain and Italy rising to unsustainable levels, gave a boost to risk assets which had been under pressure in early New York trade.

Equities are being driven by the ECB developments according to Gary Bradshaw, portfolio manager at Hodges Capital Management in Dallas.

He said investors are being distracted by overseas developments and missing the fact the U.S. economy is still improving, albeit at a slow pace.

Adding to the bullish tone, Federal Reserve Chairman Ben Bernanke told a Congressional oversight panel in a letter the Fed has room to deliver additional monetary stimulus to boost the U.S. economy.

Consumer staples was the best performing of the S&P midcap top sectors, boosted by a 10.8 percent gain in shares of Supervalu.

The U.S. grocery company's advisers are asking potential buyers to bid for the entire business, even as several suitors have inquired about individual parts of the company, Bloomberg News reported.

The S&P MidCap 400 index rose 0.4 percent while the S&P SmallCap 600 index added 0.5 percent. The Russell 2000 also rose 0.5 percent.

For the week, mid caps were down 0.7 percent, small caps dropped 1 percent and the Russell 2000 fell 1.2 percent. It was the largest percentage weekly drop for the three indexes in nearly three months.

Shares of Aruba Networks Inc rose 14.9 percent to $19.44, after it reported a rise in quarterly revenue on solid demand for its wireless network equipment and a host of brokerages raised their price targets on the stock.

Callaway Golf Co shares fell 5.8 percent to $5.85 after it said it will issue about 5.9 million shares of common stock as part of a refinancing transaction.