* Auto stocks up, sales race to best month since Oct 2007
* Ciena shares jump on forecast, chipmakers up
* Indexes up: Dow 0.7 pct, S&P 0.8 pct, Nasdaq 1 pct
NEW YORK, Sept 4 (Reuters) - U.S. stocks rose for a second day on Wednesday as a possible military action in Syria was seen as limited and strong auto sales lifted investor confidence in the U.S. economy.
The U.S. Senate Foreign Relations Committee approved a resolution authorizing a limited U.S. military intervention in Syria, setting the stage for a debate in the full Senate next week on the use of military force.
The Obama administration is seeking support from Congress to punish Syrian President Bashar al-Assad's government over alleged use of chemical weapons on civilians. Markets have been on tenterhooks over possible spillover in the Middle East.
Shares of Ford and General Motors posted their best day of the year as August U.S. auto sales marked the strongest month since October 2007. Ford jumped 3.5 percent to $16.91 and GM added 5 percent to $35.85.
Car sales were "another piece of solid macro data and may be justifying today's move," said Ken Polcari, director of the NYSE floor division at O'Neil Securities in New York.
Even though Syria is still being discussed, Polcari said he expected Congress will approve a limited engagement to "not embarrass the President or the country."
Polcari added the S&P 500 will continue to trade in a 1,625-1,660 range until the next big news breaks, which could be a Syria intervention or Friday's payrolls report.
Lowered concern over Syria was also seen in the oil market, with U.S. crude down 1.2 percent and Brent down 0.6 percent.
The Dow Jones industrial average rose 96.91 points or 0.65 percent, to 14,930.87, the S&P 500 gained 13.31 points or 0.81 percent, to 1,653.08 and the Nasdaq Composite added 36.43 points or 1.01 percent, to 3,649.042.
The S&P 500 is up 1.2 percent for the week so far after a loss of 1.8 percent last week, which was tied largely to worries over Syria.
With global supplies of dynamic random access memory chips already tight, shares of Micron Technology and SanDisk rose after reports of a fire at Hynix, the world's No. 2 DRAM chips maker. Hynix said the fire did not cripple critical equipment, but Micron closed up 5.3 percent at $14.75 and SanDisk added 3.3 percent to $57.14.
E*Trade Financial was the largest percentage advancer on the S&P 500 after it said U.S. bank regulators have approved its request to use capital from its bank subsidiary for broader corporate purposes, a sign of strength as it recovers from bad mortgage loans. Shares jumped 8 percent to $15.71, the highest in more than two years.
Network equipment maker Ciena Corp soared 13.8 percent to $23.54 after it forecast strong revenue for the current quarter as it gains from a recovery in spending by telecom carriers, its biggest customers.
U.S.-traded shares of BlackBerry jumped 5.3 percent to $10.75. The Wall Street Journal reported BlackBerry's board hopes to run a "fast" auction process that could result in a sale of the company by November.
About 6.1 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, slightly below the daily average so far this year of about 6.3 billion shares.
On the NYSE, roughly five issues rose for every two that fell, and on Nasdaq fewer than two rose for every decliner.