* Banks up after Europe news, Goldman Sachs upgrade
* Home builders gain after October pending home sales rise
* Dow up 1 pct, S&P up 1.3 pct, Nasdaq up 1.2 pct
* for up-to-the-minute market news see [STXNEWS/US] (Updates to close)
NEW YORK, Dec 2 (Reuters) - Wall Street rallied for a second day on Thursday as concerns about Europe's sovereign debt crisis waned, giving investors the chance to add to positions in winners among banks and retailers.
More than two stocks rose for every decliner on the New York Stock Exchange, with bank stocks leading the way after Goldman Sachs said improving economic conditions will favor that sector. [ID:nN02228894]
The European Central Bank allayed some concerns of a growing euro-zone crisis with hefty purchases of Portuguese and Irish debt. The European Central Bank, however, said it did not plan to increase the size of its liquidity program at this time.
The KBW bank index <.BKX> shot up 3.9 percent. The S&P 500 financial index <.GSPF> rose 2.6 percent, making it the largest gainer among S&P sectors.
"The fears had been centered on Europe. That seems to have stabilized, and now the focus is on what domestic and international growth will look like. People are betting that growth will be better than people had feared," said Mark Bronzo, portfolio manager at Rydex-SGI in Irvington, New York.
Retailers' shares rose on stronger-than-expected November sales data, which reflects a healthy start to the holiday shopping season. The S&P 500 retail index <.RLX> rose 1.8 percent.
The data follows a recent flurry of reports suggesting a pick-up in U.S. economic activity that has let investors worry less about troubles overseas.
The Dow Jones industrial average <.DJI> gained 106.63 points, or 0.95 percent, to 11,362.41. The Standard & Poor's 500 Index <.SPX> rose 15.46 points, or 1.28 percent, to 1,221.53. The Nasdaq Composite Index <.IXIC> added 29.92 points, or 1.17 percent, to 2,579.35.
Further supporting financial shares, Goldman Sachs Group
Inc
Shares of regional lender Marshall & Ilsley Corp
Home builders' stocks rose as an index of pending home sales unexpectedly climbed in October, hinting the economic recovery had started to stabilize. The Dow Jones U.S. Home Construction index <.DJUSHB> advanced 3.7 percent.
Bob Doll, chief equity strategist at BlackRock, said an easing of fears over Europe meant investors could focus on the strengthening economic picture, which was showing a "continuation of this modest and noticeable improvement."
"Contrast it with the summer months when a double-dip was in everybody's vocabulary and lo and behold, things start getting a little bit better," he said.
Data showed U.S. retailers reported higher-than-forecast sales for November, while the four-week moving average for initial weekly claims for jobless benefits fell to a fresh two-year low, though new requests rose for the week. [ID:nN02149928]
PepsiCo Inc
The Dow and the S&P 500 scored their biggest one-day percentage gains in three months on Wednesday as optimism about efforts to resolve the European Union's debt crisis helped push the S&P above 1,200.
If the S&P 500 continues to hold above 1,200, the market will see strong resistance at 1,225-1,230, which coincides with a recent two-year high and the 61.8 percent Fibonacci retracement of the benchmark's slide from October 2007 to March 2009, a key technical indicator.
About 8.43 billion shares traded on the New York Stock Exchange, the American Stock Exchange, and the Nasdaq, compared with an average of 8.45 billion so far this year. (Reporting by Edward Krudy; Editing by Kenneth Barry)