Wall Street claws back after steep drop, banks up

NEW YORK (Reuters) - U.S. stocks rose on low volume on Friday as the S&P 500 index bounced back from its second-worst decline of the year.

The benchmark index slid 2.2 percent on Thursday, its biggest drop since June 1, on signs of a global slowdown in manufacturing growth.

"The market oversold yesterday, so you're definitely getting a bounce off an overreaction," said Janna Sampson, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.

Bank shares, among the worst hit on Thursday, rose after Moody's Investors Service announced credit downgrades, ranging from one to three notches, for 15 of the world's largest banks. The downgrades reflected the banks' risk of losses from volatile capital market activities.

"The market doesn't think there's anything new in the Moody's downgrade. Credit rating agencies are lagging the market in their information," Sampson said.

JPMorgan Chase & Co shares rose 1.8 percent to $36.16 following a 2.6 percent drop Thursday. The KBW Bank index <.BKX> gained 0.8 percent.

The Dow Jones industrial average <.DJI> rose 40.42 points, or 0.32 percent, to 12,613.99. The S&P 500 Index <.SPX> gained 4.25 points, or 0.32 percent, to 1,329.76. The Nasdaq Composite <.IXIC> added 17.68 points, or 0.62 percent, to 2,876.77.

Merck & Co was the top points gainer on the S&P 500, up 1.9 percent at $40.21.

Roughly 3 billion shares had traded on the New York Stock Exchange, NYSE Amex and Nasdaq in early afternoon.

But trading volume is expected to spike toward the market's close, just before Russell Investments announces the rebalancing of its indexes. Assets totaling $3.9 trillion are benchmarked to the indexes globally.

Facebook shares , which Russell named in its preliminary list of additions to the Russell 3000 index <.RUI>, have rallied more than 21 percent in the past two weeks. They were up 3.6 percent to $32.98 on Friday but were still off more than 13 percent from the $38 initial public offering price.

The S&P 500 index is down 0.9 percent for the week but remains on track for its first monthly gain since March.

Darden Restaurants Inc fell 1 percent to $49.90 after the operator of Olive Garden and Red Lobster restaurant chains reported sales that missed estimates and forecast weaker-than-expected profits.

Ryder Systems Inc slumped 13 percent to $35.44 after the transportation and logistics company cut its quarterly earnings forecast, citing lower demand at its commercial rental business.

(Reporting by Rodrigo Campos; Editing by Kenneth Barry)