* Portuguese bond sale brings strong demand
* JPMorgan could set a 75 cent to $1 dividend--Dimon
* Wells Fargo raises U.S. bank sector to "overweight"
* Indexes up: Dow 0.9 pct, S&P 0.9 pct, Nasdaq 0.7 pct (Updates to midday)
By Chuck Mikolajczak
NEW YORK, Jan 12 (Reuters) - U.S. stocks rose on Wednesday after a healthy bond sale in Portugal eased nervousness about the euro zone's debt crisis and investors pushed U.S. bank shares higher on signs of strength.
European shares rallied to a 28-month high, led by banks, on hopes euro-zone finance ministers would beef up the European Union's rescue fund and after Portugal sold 1.25 billion euros ($1.62 billion) amid strong demand.
"It's a relief rally -- and some of the relief is simply due to the fact that the wheels didn't come off in Europe last night. That's very good news for the markets in the short term," said Brian Battle, director at Performance Trust Capital Partners in Chicago"
In another sign of investors' increased appetite for risk, the euro gained 0.7 percent against the dollar.
JPMorgan Chase & Co climbed 2.6 percent to $44.73 to lead the KBW bank index, up 1.4 percent. JPMorgan Chief Executive Jamie Dimon said the bank could pay an annual dividend of 75 cents to a dollar once the Federal Reserve gives its approval, pending the completion of stress tests..
"The news from JPMorgan starts to bring some clarity into that issue and remind the market these companies are ultimately going to be good dividend payers, further restoring confidence," said Eric Kuby, chief investment officer at North Star Investment Management Corp in Chicago.
Also fueling gains among financials were positive comments on the sector from Wells Fargo, which raised the U.S. bank sector to an "overweight" rating, citing a decline in credit costs and positive loan growth.
The Dow Jones industrial average rose 105.05 points, or 0.90 percent, at 11,776.93. The Standard & Poor's 500 Index gained 11.75 points, or 0.92 percent, at 1,286.23. The Nasdaq Composite Index advanced 17.56 points, or 0.65 percent, at 2,734.39.
Shares of ITT Corp surged more than 15 percent to $60.83 after the diversified manufacturer said it would separate its businesses into three different publicly traded companies, and shareholders will own shares in all three.
The stock was the top performer on the PHLX defense sector index, which rose 2 percent.
The Fed will release its Beige Book of regional economic conditions at 2 p.m..
(Additional reporting by Rodrigo Campos and Alina Selyukh; Editing by Kenneth Barry)