* S&P 500 bounces back from biggest daily drop since Nov. 7
* Fed chief says bond-buying benefits are clear
* Home Depot rises as profit, sales top expectations
* Dow up 0.5 pct, S&P up 0.1 pct, Nasdaq off 0.2 pct
By Rodrigo Campos
NEW YORK, Feb 26 U.S. stocks mostly rose on
Tuesday after Federal Reserve Chairman Ben Bernanke defended the
Fed's bond-buying stimulus before Congress, but warned forced
spending cuts that could be triggered this week represented a
headwind for the economy.
Gains in homebuilders and other consumer stocks, following
strong economic data, kept the S&P 500 nearly unchanged, while a
5 percent jump in Home Depot lifted the Dow industrials.
The PHLX housing sector index rose 2 percent.
Stocks hit session highs shortly after Bernanke, in
testimony before the Senate Banking Committee, strongly defended
the Fed's bond-buying stimulus program that has been essential
for the stock market's recovery.
However, he also urged lawmakers to avoid sharp spending
cuts set to go into effect on Friday, which he warned could
combine with earlier tax increases to create a "significant
headwind" for the economic recovery.
"He really came down foursquare on the bearish camp with
respect to the potential economic impact of these cuts. That's a
surprise, and that's probably why the market's a little nervous
right now," said Michael Jones, chief investment officer of
Riverfront Investment Group in Richmond, Virginia.
The Dow Jones industrial average rose 74.64 points or
0.54 percent to 13,858.81. The S&P 500 gained 1.78 points
or 0.12 percent to 1,489.63. The Nasdaq Composite
dropped 5.84 points or 0.19 percent to 3,110.41.
The S&P 500 failed to move above 1,500, a closely watched
level that was technical support until recently, but could now
become a hurdle.
Cable network AMC Networks was the Nasdaq's biggest
percentage decliner after the home of popular shows such as "The
Walking Dead" and "Mad Men" reported a quarterly profit way
below analysts' estimates. Its stock fell 7.4 percent to $53.77.
Equities continued to be weighed by concerns about a
stalemate in Italy after a general election failed to give any
party a parliamentary majority, posing the threat of prolonged
instability and European financial crisis.
The FTSEurofirst-300 index of top European shares
unofficially closed down 1.3 percent at 1,150.58. The benchmark
Italian index tumbled 4.9 percent.
Dow component Home Depot Inc was the top gainer in
both the Dow and the S&P 500 after the world's largest home
improvement chain reported adjusted earnings and sales that beat
expectations. Home Depot's shares jumped 5.5 percent to $67.46.
Macy's Inc shares climbed 2.8 percent to $39.60 after
the department-store chain stated it expects full-year earnings
to be above analysts' forecasts because of strong holiday sales.
Economic reports that showed strength in housing and
consumer confidence also supported stocks.
U.S. home prices rose more than expected in December,
according to the S&P/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.