Wall Street stays aloft on bank optimism, Fed

NEW YORK (Reuters) - Stocks advanced on Wednesday as bank stocks surged on optimism that the Obama administration was accelerating a plan to remove money-losing assets from banks' books in an effort to revive lending.

The market also got some support from the Federal Reserve's statement that the central bank would be prepared to buy long-term government debt if that would help improve conditions in financial markets.

Indexes briefly added to gains following the Fed's policy statement, but the boost was somewhat short-lived as some investors determined that the Fed's comments revealed very little that was new.

"By and large, I don't see a lot in there that wasn't known prior to the report," said Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis. "We realized the Fed was moving toward using long markets as their new fed funds policy tool."

The Dow Jones industrial average <.DJI> gained 182.32 points, or 2.23 percent, to 8,357.05, after earlier rising as high as 8,405.87. The Standard & Poor's 500 Index <.SPX> climbed 25.84 points, or 3.06 percent, to 871.55. The Nasdaq Composite Index <.IXIC> shot up 51.10 points, or 3.40 percent, to 1,556.00.

Financial stocks stood out, with JPMorgan among the Dow's top advancers with an 8.7 percent gain to $27.24 and the S&P financial index <.GSPF> rising 11.6 percent, on reports that plans were advancing to create a "bad bank" that would mop up assets whose worth has plummeted.

(Reporting by Ellis Mnyandu and Leah Schnurr; Editing by Jan Paschal)