U.S. stocks rallied, giving the Standard & Poor’s 500 Index its biggest two-day gain in more than a month, as economic data topped estimates and investors speculated Europe will act to contain the region’s debt crisis.

Alcoa Inc. and Cisco Systems Inc. added at least 2.7 percent to pace gains among companies most-tied to the economy. Financial stocks rebounded as Morgan Stanley jumped 3.4 percent. Monsanto Co. climbed 5.2 percent as the world’s largest seed company forecast higher-than-expected earnings. Yahoo! Inc. surged 10 percent, the most since 2008, after a report that Microsoft Corp. may make a bid. Apple Inc. gained 1.5 percent, preventing the longest decline since 1998.

The S&P 500 advanced 1.8 percent to 1,144.04 at 4 p.m. New York time, rallying 4.1 percent in two days. The Dow Jones Industrial Average added 131.24, or 1.2 percent, to 10,939.95.

“We are headed for the mother of all counter-trend rallies in equities,” said Michael A. Gayed, the chief investment strategist at Pension Partners LLC in New York. “We’ve seen tremendous panic. There’s likely to be some kind of reevaluation of the financial sector. It could be because of the realization that we’re going to have some sort of recapitalization in Europe. It could very well be that we saw the bottom."

Stocks reversed losses yesterday, rallying in the final hour of trading, amid speculation European Union officials are examining how to recapitalize the region’s banks. The S&P 500 was on the brink of a bear market during the worst of yesterday’s losses, falling more than 20 percent from an April peak. The index is now down 16 percent since April 29, on concern about Europe’s debt crisis.

‘Bad Bank’

The International Monetary Fund said EU officials are working on plans to boost bank capital. France and Belgium said a ‘‘bad bank” will be set up to hold Dexia SA’s troubled assets. German Chancellor Angela Merkel said Europe’s rescue fund will only be used as a last resort to save banks and that investors may have to take deeper losses as part of a Greek rescue.

Investors also weighed economic reports that topped forecasts. Private employment expanded last month, while the Institute for Supply Management’s non-manufacturing index fell to 53. The median forecast of 75 economists surveyed by Bloomberg News was for a drop to 52.8. Orders picked up.

‘Three Up Closes’

A rally in the S&P 500 tomorrow would represent “three up closes off a low,” a pattern that may result in a “sharp decline” a day later, according to Tom DeMark, the creator of indicators for identifying turning points in securities.

“People are not smart off of market bottoms,” DeMark said in an interview on Bloomberg Television. “If you do get three up closes off a low, we’ll see a vacuum in the market and that vacuum will accent the decline even more than the upside.”

DeMark, the founder of Market Studies LLC, said on Sept. 22 that the S&P 500 might drop as low as 1,076 before investor panic abated and stocks advanced. The benchmark index for American equities fell yesterday to 1,074.77 and has gained 6.4 percent since.

The Morgan Stanley Cyclical Index of companies most-tied to the economy rose 2.7 percent today. The Dow Jones Transportation Average, a proxy for the economy, added 2.7 percent. Alcoa, the largest U.S. aluminum producer, gained 2.7 percent to $9.37. Cisco increased 3.7 percent to $16.16.

Banks Rebound

The KBW Bank Index of 24 stocks rallied 1.1 percent after falling as much as 2.5 percent. Morgan Stanley jumped 3.4 percent to $14.48. Bank of America Corp. added 0.2 percent to $5.77 after falling as much as 4.3 percent.

Monsanto advanced 5.2 percent to $66.25. The company forecast higher-than-forecast fiscal first-quarter profit as Latin American farmers increase demand for genetically modified crops. Profit will be 10 cents to 15 cents a share in the three months that began Sept. 1. Five analysts surveyed by Bloomberg estimated earnings of 8 cents, on average.

Yahoo surged 10 percent to $15.92. Microsoft might enlist a partner to go after Yahoo, Reuters reported today, citing sources close to the situation. Yahoo spurned a $47.5 billion bid from Microsoft in 2008. No decision has been made to come back to the negotiating table, and there are internal divisions at Microsoft over the idea, Reuters said.

Apple, the world’s largest technology company, rose 1.5 percent to $378.25, halting a string of consecutive declines. The stock fell 7.9 percent over the previous seven days.

Analyst Changes

Some stocks moved on analysts’ recommendations. Walt Disney Co., the largest theme-park operator, added 5.5 percent, the most in the Dow, to $31.51 after being raised to “buy” from “hold” at Citigroup Inc. Apollo Group Inc., the biggest U.S. for-profit college, gained 8.5 percent to $42.22 as Credit Suisse Group AG boosted its rating to “outperform” from “neutral.”

The U.S. stock market probably hit bottom yesterday and will rebound as investors refocus on fundamentals and earnings after weeks of distraction from the European debt crisis, Oppenheimer & Co.’s Brian Belski said.

The U.S. stock market is positioned for a rally after weeks of defensive positioning and indiscriminate selling that has led to record declines, Belski, chief investment strategist at Oppenheimer in New York, said on Bloomberg Television’s “Inside Track With Deirdre Bolton and Erik Schatzker.” Investors have become overly focused on the daily news on the Greek sovereign debt crisis and have forgotten that earnings drive stock prices, not macroeconomic news, he said.

“Earnings will surprise to the upside -- earnings estimates have been slashed too much,” Belski said. “The market’s going to get squeezed and we’re going to have a nice year-end rally.”