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* Stocks surge in last hour, reversing earlier losses
* All 11 major S&P 500 sectors end positive
* Dow up 1.14 pct, S&P 500 up 0.86 pct, Nasdaq up 0.38 pct (Updates with further comment, market information)
By Lewis Krauskopf
Dec 27 (Reuters) - U.S. stocks roared back to end inpositive territory on Thursday following steep losses for muchof the session, as equities rebounded for a second day.
The failure of an initial selloff to gain more momentum lentcredence to the idea that the extended bout of selling pressuremay be coming to an end for now, investors said.
The gains come a day after the major indexes posted theirbiggest daily percentage increases in nearly a decade. The S&P500's two-day percentage gain of 5.9 percent is the bestperformance for the benchmark index since late August 2015 whenthe market was in the midst of a downturn over a slowing China.
Even so, all three major indexes remain down more than 9percent for December. The S&P 500 is on track for its biggestannual percentage drop since 2008.
"The market is right now in a psychological frenzy, bothgood and bad," said David Katz, chief investment officer atMatrix Asset Advisors in New York. "There's fear of the marketgoing down; there's fear of missing the rebound."
Stocks were lower for most of Thursday's session, andstrategists said such a pullback was to be expected followingthe huge jump on Wednesday, when the Dow Jones IndustrialAverage rose 1,000 points for the first time.
Almost in unison, stocks across market sectors began risingaround 2:30 p.m. ET, shortly after the S&P 500 briefly brokebelow 2,400, a level that has been repeatedly tested during thelast several days of choppy trading.
From there the index surged 3.8 percent to close at itshighest point in a week.
Even the clutch of technology and internet stocks that werethe biggest drags through the first several hours of tradingrecovered most or all of their losses. Apple IncAAPL.O gained4 percent from its low and Amazon IncAMZN.O shot up 5percent; both finished the day about 0.6 percent lower.
Microsoft CorpMSFT.O , which had been among the biggestdrags on the S&P 500, surged 4.8 percent to finish 0.6 percenthigher on the session, ending up as the third-biggest boost tothe index.
"I just think that the selling has been exhausted in thenear term. When yesterday's rally only retraced a portion thismorning, buyers came back in at the end of the day," said RickMeckler, partner at Cherry Lane Investments, in New Vernon, NewJersey. "The general feeling is that a near-term bottom has beenput in."
The Dow Jones Industrial Average .DJI rose 260.37 points,or 1.14 percent, to 23,138.82, the S&P 500 .SPX gained 21.13points, or 0.86 percent, to 2,488.83 and the Nasdaq Composite .IXIC added 25.14 points, or 0.38 percent, to 6,579.49.
All 11 major S&P 500 sectors finished in positive territory,with materials .SPLRCM as the biggest percentage gainers.
Investors also said the steep pullback in recent months,which has seen the Nasdaq confirm a bear market and the S&P 500come within a whisker of doing so, may have created somebargains that are attracting buyers.
"Certainly there are folks that do recognize an opportunity,they stepped in, but then other people see it as a sellingopportunity so that is kind of the back and forth," said PeterJankovskis, co-chief investment officer at OakBrook InvestmentsLLC in Lisle, Illinois.
Trade tensions between the United States and China, anexpected slowdown in U.S. corporate profit growth and thegeneral health of the economy remain concerns for investorsheading into 2019.
A measure of U.S. consumer confidence posted its sharpestdecline in more than three years in December, deflating someoptimism a day after a report that holiday sales were thestrongest in years helped mollify concerns about the health ofthe economy. urn:newsml:reuters.com:*:nL1N1YW089
"The consumer has been a big support for this economy and ifall of a sudden the consumer starts to get a little bit anxiousand spending slows down, that's going to have an impact," saidDavid Joy, chief market strategist at Ameriprise Financial inBoston.
About 9 billion shares changed hands in U.S. exchanges, justbelow the 9.2 billion daily average over the last 20 sessions.
Advancing issues outnumbered declining ones on the NYSE by a1.20-to-1 ratio; on Nasdaq, a 1.03-to-1 ratio favored advancers.
The S&P 500 posted no new 52-week highs and 4 new lows; theNasdaq Composite recorded 7 new highs and 270 new lows. (Reporting by Lewis KrauskopfAdditional reporting by Chuck Mikolajczak in New York and MedhaSingh in Bengaluru; Editing by Phil Berlowitz) ((email@example.com; 646-223-6082; ReutersMessaging: firstname.lastname@example.org,Twitter: @LKrauskopf))