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Stocks rally as investors digest Fed chief's words

Updated at 1:30 p.m. ET : Stocks rallied Wednesday, recovering from a drop at the open, as investors digested Fed Chairman Ben Bernanke's semi-annual "Monetary Policy Report to the Congress" before the House Financial Services Committee.

Wednesday marked the second day of testimony for Bernanke. He spoke before a Senate committee on Tuesday, and while he didn't give any specifics over what the central bank might do to accelerate growth amid signs of weakness, he left the door open to more stimulus if it became clear unemployment was not falling or if deflation risks mounted.

Intel joined the ranks of tech companies cutting their outlooks in a sign of how tepid economic conditions worldwide are hurting revenue.

Financials were also in focus following results from Bank of America, which swung to a second-quarter profit following a massive mortgage-related charge a year earlier but also posted a decline in revenue.

Intel late Tuesday cut its full-year revenue outlook and said consumer spending in Europe and the United States was softer than previously thought.

"We're clearly seeing softness in company revenue because of Europe and the global slowdown, and that's a concern," said Oliver Pursche, president at Gary Goldberg Financial Services in Suffern, New York.

"We're seeing those fears spread across industries, but Bank of America is another example of financials being surprisingly strong. That could be a sector that shines because expectations are so low."

Among tech stocks, Advanced Micro Devices and Applied Materials also cut their guidance in recent weeks, contributing to month-to-date losses of more than 2 percent in the S&P information technology index. The group is considered a proxy for business spending, and the weak views in the sector could have broader implications.

With 7 percent of S&P 500 companies having reported thus far in the earnings season, 65 percent have beaten profit expectations, according to the latest Thomson Reuters data. Only 15 percent have missed.

Groundbreaking on new U.S. homes rose in June to its fastest pace in over three years, lending a helping hand to an economy that has shown worrisome signs of cooling. Futures were little impacted by the data.

Wall Street rose on Tuesday, lifted by strong results from Goldman Sachs and Coca-Cola. Still, the S&P has posted losses in seven of the last nine sessions, falling about 1 percent.

Reuters contributed to this report.