Stocks rose in light volume on Tuesday, rebounding after the S&P 500 fell to its lowest in over two months in the previous session.

With some analysts describing the S&P's decline over the past five weeks as overdone, investors snapped up battered stocks in the basic materials and consumer sectors.

Trading was light before comments on the economic outlook from Federal Reserve Chairman Ben Bernanke later on Tuesday. By afternoon about 4.01 billion shares were traded on the New York Stock Exchange, NYSE Amex and Nasdaq.

The market's reaction to the pessimist tone on economic data in the past few days was some heavy selling, but investors are starting to trim their short positions here as things start to stabilize, said Joseph Greco, managing director at Meridian Equity Partners in New York.

The Dow Jones industrial average <.DJI> was up 81.74 points, or 0.68 percent, at 12,171.70. The Standard & Poor's 500 Index <.SPX> was up 8.97 points, or 0.70 percent, at 1,295.14. The Nasdaq Composite Index <.IXIC> was up 17.63 points, or 0.65 percent, at 2,720.19.

The S&P 500 dropped 4.9 percent since a recent high at the start of May. The benchmark index is up 3 percent so far this year.

Bernanke is due to speak at a banking conference in Atlanta at 3:45 p.m.

Fed officials have said recent data was a disappointment, with Eric Rosengren, president of the Boston Fed, suggesting it could delay the Fed's exit from its extremely easy monetary policy.

I expect Bernanke's language to be stern regarding the pace of the economic recovery, but not alarming. We are in a fragile moment but if he stays within the context, the market is likely to react fairly positive, Greco said.

Some investors are seeing an opportunity after weeks of soft economic data failed to create a panic in the U.S. stock market. Expectation of strong earnings reports in July could bring in buyers who want to get ahead of the expected move up next month.

Recently battered energy shares bounced back despite a drop in U.S. crude prices, though Brent crude rose, helped in part by a weaker U.S. dollar. Healthcare and utility stocks also ranked among the leaders.

Bank stocks, heavily sold in recent weeks, were among the biggest gainers. JPMorgan Chase & Co rose 1.6 percent to $41.17, while the KBW bank index <.BKX> was up 0.9 percent.

But not all market participants were ready to call the end of the downturn. Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey, said light volume and lack of buyers could mean any bounce is short-lived.

The problem for institutions on a day like today is the volume being light. Any concerted effort to raise funds (sell positions) could have a disproportionate impact on pricing as buyers will be on the thin side, he wrote in a note to clients.

In company news, International Paper Co launched a $3.3 billion unsolicited offer for rival Temple-Inland Inc . Shares of Temple-Inland shot up 42.4 percent to $29.91, while IP's stock rose 1.5 percent to $30.08. Temple-Inland said it adopted a stockholder rights plan to fend off the hostile takeover.

(Reporting by Angela Moon, Editing by Kenneth Barry)