* S&P 500 coming off biggest daily drop since Nov. 7
* Fed chief says benefits clear from bond-buying
* Home Depot rises as profit, sales top expectations
* Indexes up: Dow 0.6 pct, S&P 0.4 pct, Nasdaq 0.3 pct
NEW YORK, Feb 26 (Reuters) - U.S. stocks advanced on Tuesday, rebounding from a steep decline a day earlier after an inconclusive Italian election and on Federal Reserve Chairman Ben Bernanke's testimony defending the central bank's bond-buying program.
Major indexes had fallen more than 1 percent on Monday, with the S&P 500 dropping the most since November on voting in Italy where groups opposed to austerity posted a strong showing. But no faction secured a clear majority in parliament, renewing fears about a new euro zone debt crisis.
"There's an increased willingness to buy equities, and every decline is met with a new round of buying, but there's a question as to whether that can be sustained," said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland, Ohio.
European equities, which closed before the results on Monday, fell 1.1 percent, even as U.S. shares rose.
"It's a little surprising that we're not taking Europe more seriously now," he added. "It will be hard for us to avoid the weight of Europe's decline, and the question is whether our early strength will hold throughout the day."
In testimony before the Senate Banking Committee, Bernanke strongly defended the Fed's bond-buying stimulus program, or quantitative easing. Equities have benefited from the Fed's easy monetary policy, designed to boost the economy and employment.
"If Bernanke were to give any nugget of information about when QE might end, that would move markets, but we haven't seen anything like that," said Mike Shea, a trader at Direct Access Partners in New York.
Last week, concerns the Fed might curtail or end its stimulus efforts earlier than expected prompted a sharp decline by stocks, though they recovered most of the lost ground by the end of the week.
The Dow Jones industrial average was up 88.66 points, or 0.64 percent, at 13,872.83. The Standard & Poor's 500 Index was up 6.09 points, or 0.41 percent, at 1,493.94. The Nasdaq Composite Index was up 7.82 points, or 0.25 percent, at 3,124.07.
Dow component Home Depot Inc was the top gainer on both the Dow and S&P 500 after reporting adjusted earnings and sales that beat expectations, sending shares up 5.6 percent to $67.52.
Macy's Inc rose 3.3 percent to $39.80 after stating it expects full-year earnings to be above analysts' forecasts because of strong sales in the holiday period.
Economic reports that showed strength in housing and consumer confidence also supported stocks.
Home prices rose more than expected in December, according to the Standard & Poor's/Case-Shiller index. Consumer confidence rebounded in February, jumping more than expected, and new-home sales rose to their highest in 4-1/2 years.
For the benchmark S&P 500 index, 1,500 will be watched as a key level after the index closed below it on Monday for the first time since Feb. 4, with selling accelerating after falling below it. An inability to break back above it could portend further losses.