By Tanya Agrawal
(Reuters) - The S&P 500 and the Dow Jones Industrial Average were on track for their best one-day percentage gain in about two months on Wednesday as financial stocks led a broad rally, while the Nasdaq rose more than 1 percent as tech stocks rebounded.
Bank stocks gained as the yield between five-year notes and 30-year bonds steepened, after falling to their lowest level since late 2007 overnight.
Bond prices rebounded, following a Reuters report that the market had overinterpreted chief Mario Draghi's comments that the ECB was ready to start withdrawing the emergency stimulus for the economy.
The financial index's 1.65 percent rise led the gainers, with Bank of America, JPMorgan boosting the S&P, while Goldman Sachs helped lift the Dow.
At 12:39 p.m. ET (1639 GMT), the Dow Jones Industrial Average was up 156.53 points, or 0.73 percent, at 21,467.19, the S&P 500 was up 20.43 points, or 0.84 percent, at 2,439.81.
The Nasdaq Composite was up 65.84 points, or 1.07 percent, at 6,212.46.
The tech sector, which has been under pressure recently due to lofty valuations, was up 0.81 percent.
Apple, Amazon and Facebook were the top boosts to the Nasdaq.
With investors awaiting second-quarter corporate earnings, equity valuations have come under focus at a time when inflation remains low, recent economic data has been tepid and President Donald Trump's pro-growth policies face delays.
The S&P 500 is trading at nearly 18 times forward earnings estimates, well above its long-term average of 15 times.
"Valuations are certainly a little bit elevated and they are a bit of a concern," said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.
"We saw valuations run up in the first quarter but then when earnings came out they were pretty solid so ultimately if earnings continue at the rate we've seen recently, then those valuations will be fine."
Federal Reserve Chair Janet Yellen said on Tuesday that by standard metrics, some asset valuations look high while Vice Chair Stanley Fischer warned that central bank must remain vigilant in monitoring financial stability risks.
San Francisco Fed head John Williams said investors may be getting overly complacent about risks and that "the stock market seems to be running pretty much on fumes."
Oil futures climbed to their highest in more than a week despite a surprise build in crude inventories, as buyers were encouraged by a small weekly decrease in U.S. production.
KB Home was up 3.7 percent at $23.66 after the homebuilder increased its full-year forecast.
General Mills rose 1.6 percent to $56.46 after the Cheerios maker's quarterly profit beat estimates.
Advancing issues outnumbered decliners on the NYSE by 2,346 to 514. On the Nasdaq, 2,137 issues rose and 634 fell.
(Reporting by Tanya Agrawal; Editing by Arun Koyyur)
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