Banks lead Wall Street advance

NEW YORK (Reuters) - U.S. stocks rose on Wednesday after a healthy bond sale in Portugal and signs of strength in the U.S. banking sector.

European shares rallied, led by banks, on hopes euro-zone finance ministers would beef up the European Union's rescue fund and after Portugal sold 1.25 billion euros ($1.62 billion) to strong demand. Lisbon's borrowing costs fell on the 10-year issue but rose in the five-year.

"We've got good news out of Europe, a pretty receptive (Portuguese) auction and at least through the market close in Europe, we're going to see a nice tailwind here," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

The euro rose 0.5 percent against the U.S. dollar.

JPMorgan Chase & Co rose 1.6 percent to $44.30 to lead the KBW bank index <.BKX>, up 1.6 percent. JPMorgan Chief Executive Jamie Dimon said the bank could pay an annual dividend of 75 cents to a dollar once the Federal Reserve gives its approval.

"They're generating a lot of cash flow, and (it shows) one of our leading banks is in a powerful position," said Ablin. "It bolsters confidence whether you're a holder of JPMorgan or not."

Adding to the positive sentiment, Wells Fargo raised the U.S. bank sector to an "overweight" rating.

The Dow Jones industrial average <.DJI> gained 51.62 points, or 0.44 percent, to 11,723.50. The Standard & Poor's 500 Index <.SPX> rose 5.67 points, or 0.44 percent, to 1,280.15. The Nasdaq Composite Index <.IXIC> added 6 points, or 0.22 percent, to 2,722.83.

The Fed will release its Beige Book of regional economic conditions at 2 p.m..

Shares of ITT Corp soared more than 18 percent to $62.32 after the diversified manufacturer said it would separate its businesses into three different publicly traded companies, and shareholders will own shares in all the three corporations.

(Editing by Padraic Cassidy)

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