The prospect that the Fed may pause enabled the market to bounce back from initial losses, triggered by China's decision to lift its benchmark rate unexpectedly.

FirstEnergy Corp. and Bank of America Corp. led gains in utilities and financial companies, among the most sensitive to borrowing costs, after Bernanke testified to Congress that the Fed may ``decide to take no action at one or more meetings.''

``Few people thought that he would be that explicit,'' said Frederic Dickson, chief market strategist at D.A. Davidson & Co. in Great Falls, Montana, which manages $16 billion. ``We're getting closer to the end of the Fed interest-rate hikes.''

The Standard & Poor's 500 Index added 4.31, or 0.3 percent, to 1309.72, just 0.2 percent from a five-year high. The Dow Jones Industrial Average advanced 28.02, or 0.3 percent, to 11,382.51, a six-year high.

The Nasdaq Composite Index added 11.32, or 0.5 percent, to 2344.95, helped by shares of Intel Corp. after the chipmaker pledged to slash costs.

Trading on the New York Stock Exchange was the second busiest this year, as 2.08 billion shares changed hands. About the same number of stocks rose and fell on the NYSE.

Microsoft Corp.'s earnings report released after the close pointed to a lower open for the market tomorrow as the world's largest software maker gave an annual earnings forecast that missed some Wall Street estimates.

In his second appearance before Congress as Fed chairman, Bernanke suggested to the Joint Economic Committee that the central bank may pause its rate increases and called the outlook for inflation ``reasonably favorable.''

``Once the Fed gets out of the way, the market will rally,'' said Rick Campagna, who helps manage $4.5 billion at Provident Investment Counsel in Pasadena, California.

The market opened lower after the People's Bank of China said the country's one-year lending rate will increase to 5.85 percent from 5.58 percent, effective tomorrow. The action may slow the world's fastest-growing major economy, hurting demand for commodities and construction materials.

A gauge of utilities jumped 1.3 percent as Treasury yields declined. Lower bond yields make the utilities group's dividend payouts more attractive. The utilities measure has a 3.6 percent dividend yield, twice the S&P 500's yield of 1.8 percent.

FirstEnergy, owner of electric utilities in Ohio, Pennsylvania and New Jersey, gained $1.45 to $50.89. Exelon Corp., the No. 1 U.S. utility owner by market value climbed 75 cents to $54.16. Duke Energy Corp. advanced 41 cents to $28.87.

The S&P 500 Financials Index jumped 1.4 percent to a record. Stable or lower interest rates increase the value of bonds owned by banks, brokers and insurers, and boost demand for mortgages and loans.