Stocks rose on Monday, pushing the benchmark S&P 500 above 900 for the first time since early January, on bets that banks won't have to raise as much capital as previously thought, and housing data fueled hopes that the recession is ebbing.

Bank stocks were among the standouts, with Citigroup up 7.1 percent at $3.18, and Bank of America climbing 16.3 percent to $10.12. Wells Fargo jumped nearly 20 percent to $23.51.

The surge took the S&P 500's gain since the 12-year closing low of March 9 to more than 32 percent. The KBW Bank index <.BKX> shot up 11.8 percent.

Although final stress test results are expected to be released on Thursday, investors bet that they would show banks do not need a larger financial cushion. That outcome would minimize the dilution of current shareholders' equity and avoid giving the government a bigger stake in the banks.

Another catalyst for bank stocks' advance emerged from White House comments that the Obama administration did not see a need right now to ask Congress for more bank bailouts.

The key thing here is going to be how much the banks are under-capitalized, said Dan Faretta, senior market strategist at Lind-Waldock, a retail brokerage firm, in Chicago.

Going into the stress tests, nobody expected anything positive to come out of this. If there's a situation where we don't have to ask for more money, that's going to be very positive for these markets.

The Dow Jones industrial average <.DJI> rose 165.59 points, or 2.02 percent, to 8,378.00. The Standard & Poor's 500 Index <.SPX> gained 22.54 points, or 2.57 percent, to 900.06. The Nasdaq Composite Index <.IXIC> climbed 30.72 points, or 1.79 percent, to 1,749.92.

Fresh data fueled investors' hopes that the economic slump may be easing as pending sales of existing homes rose unexpectedly in March, sending shares of home builders higher.

Lennar jumped 7.7 percent to $10.19, while Toll Brothers gained 5.1 percent to $20.47, and D.R. Horton added 7.4 percent to $13.28.

The Dow Jones home construction index <.DJUSHB> rose 8.1 percent.

The broad S&P 500 is at its highest level since early January and is less than half-a-percent away from turning positive for the year.

The first-quarter earnings reporting season is winding down, but Sprint Nextel Corp gave investors something to cheer when it posted a surprising quarterly operating profit.

Sprint shares jumped 8.1 percent to $5.05.

Shares of Boeing Co rose 2 percent to $42.05 after the big U.S. aircraft maker reaffirmed maiden flight plans for its 787 Dreamliner. The stock helped lift the Dow, along with diversified manufacturer United Technologies , which rose 3.3 percent to $51.15.

On Nasdaq, shares of Apple Inc provided the biggest boost, rising 3.3 percent to $131.39.

Any news that points to more stabilization in the banking sector would be a positive for stock investors since authorities have said shoring up the financial system is essential in reviving the recession-hit economy.

The government has assessed 19 major U.S. financial institutions to ensure they have sufficient capital to withstand the recession.

Bloomberg reported on Monday that Citigroup is looking to raise any additional capital it might need from private investors rather than giving more control to the government.

The Financial Times, citing people close to the situation, reported that Bank of America Corp is working on plans to raise more than $10 billion in fresh capital, but the bank denied it had such plans.

(Editing by Jan Paschal)