The S&P 500 rebounded from its worst week so far this year to retake a four-year high on Monday after Federal Reserve Chairman Ben Bernanke signaled supportive monetary policy will remain even though the job picture has begun to improve.

The three major U.S. stock indexes climbed 1 percent or more and all 10 S&P 500 sectors advanced. Gains were led by S&P technology shares, with that sector's index up 1.7 percent, and the S&P health care sector index also up 1.7 percent. Shares of International Business Machines, up 1.1 percent at $207.77, gave the Dow its biggest boost.

Bernanke's comments came as investors try to gauge how much longer a nearly six-month rally in stocks will last and reinforced the view that further quantitative easing, or QE3, from the Fed may be possible.

The S&P 500 is up 25 percent since the end of September, mostly on optimism about the pace of economic growth. With stimulus from the Fed and an improving economy, the climate for stocks is even friendlier.

There is still a lot of cash on the sidelines looking for a pullback, and I suspect some people over the weekend said, 'Yeah, maybe I'll put some money in,' and then you get Ben Bernanke's comments and that stoked the fire, said Bob Doll, BlackRock's vice chairman and global chief investment officer in New York.

The Dow Jones industrial average shot up 160.90 points, or 1.23 percent, to 13,241.63 at the close. The Standard & Poor's 500 Index gained 19.40 points, or 1.39 percent, to 1,416.51. The Nasdaq Composite Index climbed 54.65 points, or 1.78 percent, to 3,122.57.

As the quarter draws to a close, hedge funds that have been underinvested in stocks could be doing some last-minute shopping for winners in the big rally, strategists said. Financials have led the rally, though almost all S&P 500 sectors are expected to post gains for the quarter.

The S&P financial index is up 23 percent, with just four days to go until the end of the quarter.

In his talk, Bernanke said the U.S. economy needed to grow more quickly if it is to produce enough jobs to continue to bring down the unemployment rate.

Further significant improvements in the unemployment rate will likely require a more rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies, Bernanke told a gathering of the National Association for Business Economics.

The S&P index fell 0.5 percent last week, a relatively minor decline that was still the biggest weekly slide since the final week of December.

Data on Monday showed pending home sales slipped 0.5 percent in February, according to the National Association of Realtors, confounding expectations for a rise of 1 percent.

The Dow Jones U.S. home builders index still managed a gain of 0.5 percent.

Lions Gate Entertainment Corp rallied 4.5 percent to $15.18 after the strong opening of its film The Hunger Games, which made $214 million over the weekend globally.

BATS Global Markets Inc on Sunday apologized for a system failure that caused shares in its own initial public offering to erroneously trade for less than a penny on Friday and resulted in Apple Inc's shares being temporarily halted.

About 6.2 billion shares changed hands on the New York Stock Exchange, the Nasdaq and Amex, compared with the daily average for 2012 of about 6.86 billion shares.

Advancers outpaced decliners on NYSE by a ratio of slightly more than 3 to 1 and on the Nasdaq by about 10 to 3.

(Additional reporting by Edward Krudy; Editing by Jan Paschal)

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