* 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
By Ryan Vlastelica
NEW YORK, Feb 26 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
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
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
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