Wall Street rises on Bernanke comments policy

NEW YORK (Reuters)-Wall Street stocks increased from a three-day selloff on Wednesday as comments from Federal Reserve Chairman Ben Bernanke raised hopes of further stimulating the U.S. economy if necessary.

Feds earlier stimulus effort, known as the QE2, had helped the stock market to make progress with 600 billion dollars in bond purchases, which added liquidity in the economy and contributed to low interest rates.

"The possibility remains that the recent economic weakness may prove to be more persistent than expected and that deflationary risks can reemerge, implying a need for further political support," said Bernanke House Financial Services Committee.

<.vix>, CBOE volatility Index, Wall Street fear gauge, fell 7.6% to 18.37 after comments. In the last three days, VIX climbed almost 25% while the S & P 500 lost about 2.3 percent, pressured by weak results and concerns over the EU'sdebt crisis.

"The last round of quantitative easing was strictly for the benefit of inventory, and profits today, the Outlook for what is potentially a further boost, says John Kosar, research team leader at Asbury research in Chicago."But the fact that we also discuss another round, shows how the economy is still struggling. "

His comments came as investors were divided over whether the Fed would introduce another round of incentives to stimulate the economy, especially after the June security dismal jobs report. The Fed's "easy money" policy since 2008 is fueling stock market rally.

<.dji> Dow Jones industrial average was 124.27 points or 1.00 percent, at 12, 571.15. Standard & Poor <.spx> 's 500 Index was up 13.55 points, or 1.03%, at 1, 327.19. The Nasdaq Composite Index <.ixic> was up 33.64 credits, or 1.21 percent, at 2, 815.55.

Energy and materials stocks were the top winners. S & P <.gspe> energy sector index shot up 1.5 percent, while August crude futures gained 1.2%, a drop of the dollar. S & P <.gspm> materials sector index increased 1.6 percent. Baker Hughes Inc was one of the top energy sector winner, will increase 3.7 percent to $ 75.14.

Wall Street got an early boost from overseas data that showed China's economy grew faster than expected during the second quarter.

But it was still cautious over developments in Europe. Moody's downgraded Ireland's debt to junk late on Tuesday and said Ireland was likely to follow Greece in need a second operation. Irish bond yields jumped to record highs.

"Bernanke helps today to layers, but given everything else on the table, I would imagine that the market in a short time will return to focus on issues of European and U.S. budget deal soon," said Dan Ripp, Chairman of Bradley Woods and co. Ltd., New York.

News Corp shares jumped 4.6% to $ 16.06 and was Nasdaq most active stock after announcing it had withdrawn a bid of 12 billion dollars to buy 61 percent of the broadcaster BSkyB it does not already own.

News Corp is in the center of allegations that one of its tabloid newspapers committed criminal acts.

Electronic Arts Inc, computer game publisher, buys PopCap Games in some worth up to $ 1.3 billion that it is trying to ramp up its social and casual games portfolio. Shares of the Electronic Arts throw 0.4% to $ 24(10).

(Reporting by Ryan Vlastelica, editing by Kenneth Barry)