* Fed chief reaffirms support for easy monetary policy
* U.S. business spending plans gauge hits one-year high
* Priceline.com gains after results, Target lower
* Indexes up: Dow 1 pct; S&P 1.1 pct; Nasdaq 1.1 pct
By Ryan Vlastelica
NEW YORK, Feb 27 (Reuters) - U.S. stocks rose 1 percent on Wednesday, erasing much of the week's losses as Federal Reserve Chairman Ben Bernanke remained steadfast in his support of the Fed's stimulus policy and data pointed to economic improvement.
In his second day before a congressional committee, Bernanke repeated testimony in which he defended the Fed's policy of buying bonds to keep interest rates low in order to promote growth and bring down the unemployment rate.
The remarks helped the market rebound from its worst decline since November and put the S&P 500 back above 1,500, a closely watched level that has been technical support until recently.
The comments also seemed to remove a headwind from markets that last week contributed to equities breaking a seven-week streak of gains on concerns the quantitative easing program may end earlier than had been anticipated.
"The Fed continues to encourage risk-taking in markets, which is a powerful tool that makes the danger not being long stocks, not in being too long," said Tom Mangan, a money manager at James Investment Research Inc in Xenia, Ohio.
Adding to the positive tone was economic data which showed a gauge of planned U.S. business spending in January recorded its largest increase in just over a year, while contracts to buy new homes neared a three-year high last month.
The S&P 500 had climbed 6 percent for the year and came within reach of all-time highs before pulling back on concerns about Fed policy, as well as this week's inconclusive elections in Italy, which rekindled fears of a new euro zone debt crisis.
The Dow Jones industrial average was up 140.76 points, or 1.01 percent, at 14,040.89. The Standard & Poor's 500 Index was up 16.15 points, or 1.08 percent, at 1,513.09. The Nasdaq Composite Index was up 33.56 points, or 1.07 percent, at 3,163.21.
The S&P is down 0.2 percent on the week, recovering from a plunge on Monday that was the index's biggest daily drop since November. That drop came on concerns over Italy's election, as well as over sequestration - U.S. government budget cuts that will take effect starting on Friday if lawmakers fail to reach an agreement on spending and taxes.
"While the rally remains intact and there are reasons to be long-term bullish here, there are also reasons to not be surprised if we get a correction," said Mangan, who helps oversee $3.7 billion. Issues like the sequester and Europe "could mean that this ends up being a more difficult year for equities."
In earnings news, Priceline.com gained 3.4 percent to $702 after reporting adjusted earnings that beat expectations. TJX Cos Inc jumped 1.7 percent to $44.40 after the retail chain operator posted higher fourth-quarter results.
The S&P retail index climbed 1.6 percent.
Target Corp appeared poised for a solid showing in the first quarter and forecast a higher profit for the full year after a weak performance in the key holiday season. The stock dipped 1.1 percent to $63.32.
With 93 percent of the S&P 500 companies having reported results so far, 69.5 percent beat profit expectations, compared with a 62 percent average since 1994 and 65 percent over the past four quarters, according to Thomson Reuters data.
Fourth-quarter earnings for S&P 500 companies are estimated to have risen 6.2 percent, according to the data, above a 1.9 percent forecast at the start of the earnings season.