Bernanke lifts Wall Street, keeps stimulus in play

Traders work on the floor of the New York Stock Exchange, August 27, 2012.

NEW YORK (Reuters) - Stocks rose on Friday after Federal Reserve Chairman Ben Bernanke, expressing "grave concern" for the stagnating U.S. job market, said the central bank was prepared to take further steps to strengthen the economy if necessary.

Though Bernanke, speaking in Jackson Hole, Wyoming, dashed some hopes for a signal of quick action, his comments bolstered bets that the central bank was closer to providing more stimulus for an economy that is close to stalling.

Stocks had been flat for much of the week ahead of Bernanke's speech, though expectations of additional stimulus from the Fed helped the market this month. All three indexes posted gains for August.

"I think the debate is how strong growth is and how aggressive the Fed is going to be," said Giri Cherukuri, head trader at OakBrook Investments LLC, in Lisle, Illinois.

"Hopefully the economy will just get better on its own, but I think the Fed is saying they're going to be there and is trying to tell the market that they have some power to help things along."

Energy and materials shares were among the best performers, with the S&P energy index .GSPE up 0.9 percent and the S&P materials index .GSPM up 1.1 percent.

The Fed's next policy meeting is in mid-September, and many analysts are looking to it for a decision on a third round of quantitative easing.

The Dow Jones industrial average .DJI was up 90.13 points, or 0.69 percent, at 13,090.84. The Standard & Poor's 500 Index .SPX was up 7.10 points, or 0.51 percent, at 1,406.58. The Nasdaq Composite Index .IXIC was up 18.25 points, or 0.60 percent, at 3,066.96.

Even with the advance, each of the major indexes posted a second straight weekly decline. The Dow was down 0.5 percent for the week, while the S&P 500 was down 0.3 percent and the Nasdaq was down 0.1 percent.

For the month, the Dow rose 0.6 percent, the S&P 500 gained 2 percent and the Nasdaq climbed 4.3 percent, its best monthly performance since February.

Volume was light but above the low levels of earlier in week. The four other days this week were among the five lowest for volume all year.

The day's volume traded on the New York Stock Exchange, the Nasdaq and the Amex, was about 5.3 billion shares. The year-to-date average is about 6.6 billion.

Investors are looking ahead to the European Central Bank meeting on Thursday that is expected to take pressure off highly indebted countries. Comments from ECB Executive Board member Benoit Coeure rekindled expectations for central bank action.

Among the day's best performing stocks, SAIC Inc (SAI.N) was up 3.4 percent at $12.21 after the computer contractor reported a drop in second-quarter profit and said it would split its business into two independent public companies.

On the data front, consumer sentiment climbed more than expected to a three-month high, while the Institute for Supply Management-Chicago's index of Midwest business activity fell in August to 53.0 from 53.7 in July.

Advancers outpaced decliners on the NYSE by about 5 to 2 and on the Nasdaq by about 5 to 3.

(Editing by Kenneth Barry)