US STOCKS-Wall St buoyed by financials' gains

* Stocks gain on credit thaw optimism

* Financials lead the way, JPMorgan gains 6 pct

* Consumers cut spending for first time in two years

* Dow up 2.5 pct, S&P up 2.4 pct, Nasdaq up 1.9 pct (Updates to mid-afternoon)

By Leah Schnurr

NEW YORK, Oct 31 (Reuters) - U.S. stocks rose on Friday as financial shares gained on optimism over further signs of thawing in the credit markets, but the Dow remained on track to log its worst month in a decade after being battered by worries of a deepening slowdown.

The interbank cost of borrowing dollars overnight continued to ease on Friday, following the Federal Reserve's interest-rate cut earlier this week, fueling hopes that global efforts to bolster confidence in credit markets are taking hold.

Pension funds bought stocks to rebalance their portfolios, also lending support to the market, traders noted.

"Fundamentally I think one of the big stories this week is October ended, and specifically the fiscal year for institutional mutual funds and pension funds came to an end," said Bruce Zaro, chief technical strategist at Delta Global Advisors in Boston.

"I think that relieved a lot of the selling pressure and you've seen some window dressing."

JPMorgan Chase (JPM.N) and tech bellwether IBM (IBM.N) ranked as the Dow's top advancers, with JPMorgan up 6 percent and IBM up almost 3 percent.

The Dow Jones industrial average .DJI rose 231.21 points, or 2.52 percent, to 9,411.90, near its session high at 9,425.76. The Standard & Poor's 500 Index .SPX gained 25.20 points, or 2.64 percent, to 979.29, also close to its session high at 980.99. The Nasdaq Composite Index .IXIC added 34.19 points, or 2.01 percent, to 1,732.71, after earlier reaching an intraday high at 1,737.95.

JPMorgan said that it is making changes to about $110 billion in mortgages and is temporarily halting foreclosures while it alters the loans. For details, see [ID:nN31358450].

JPMorgan gained 6.2 percent to $39.95, while IBM added 2.9 percent to $93.28, both on the New York Stock Exchange.

But economic data that showed U.S. consumers are tightening their belts offered more evidence of a deep slowdown, though the market appeared to shrug it off.

U.S. consumers cut their monthly spending for the first time in two years during September, according to a U.S. Commerce Department report. [ID:nLV17353].

On Nasdaq, video game publisher Electronic Arts Inc (ERTS.O) tumbled 16.7 percent to $23.12 after it chopped its full-year profit forecast due to slowing demand.

Chevron Corp (CVX.N) reversed course to climb 1.7 percent to $75.45 after it reported quarterly profit that beat expectations. The price of oil, which had slipped earlier and pressured the stock, also rebounded. U.S. front-month crude CLc1 gained $1.85 to settle at $67.81 a barrel on the New York Mercantile Exchange.

Shares of Express Scripts Inc (ESRX.O) jumped 9.4 percent to $62.97 after the pharmacy benefit manager reported quarterly profit that beat expectations after Thursday's closing bell.

In other economic news, an index of consumer sentiment suffered its steepest monthly drop on record, according to the Reuters/University of Michigan Surveys of Consumers' final reading for October.

And the Chicago Purchasing Management Index showed that business activity in the Midwest came to a halt in October as production and new orders plummeted. (Editing by Jan Paschal)