Stocks rose on Friday after Federal Reserve Chairman Ben Bernanke said the central bank stood ready to come to the aid of the economy if necessary, although he stopped short of giving specifics about more monetary easing.

In his speech to central bankers in Jackson Hole, Wyoming, Bernanke expressed "grave concern" about the stagnation of the labor market. The wording seemed to turn the tide as stocks reversed course from a sharp fall to climb more than 1 percent before paring some of the gains.

In recent weeks stocks had rallied on expectations of additional stimulus from the Fed, most likely in the form of quantitative easing, or major purchases of bonds. But the market stalled this week as investors awaited a signal from the Fed chairman.

"I think the debate is how strong growth is and how aggressive the Fed is going to be," said Giri Cherukuri, head trader at OakBrook Investments LLC, in Lisle, Illinois.

"Hopefully the economy will just get better on its own, but I think the Fed is saying they're going to be there and is trying to tell the market that they have some power to help things along."

Energy and materials shares were among the best performers, with the S&P energy index <.GSPE> up 0.8 percent and the S&P materials index <.GSPM>

The Fed's next policy meeting is in mid-September, and many analysts are looking to it for a decision on QE3.

The Dow Jones industrial average <.DJI> was up 104.88 points, or 0.81 percent, at 13,105.59. The Standard & Poor's 500 Index <.SPX> was up 8.53 points, or 0.61 percent, at 1,408.01. The Nasdaq Composite Index <.IXIC> was up 20.29 points, or 0.67 percent, at 3,069.00.

Recent data indicated the economy continues to grow. On Friday, consumer sentiment climbed more than expected to a three-month high, while the Institute for Supply Management-Chicago's index of Midwest business activity fell in August to 53.0 from 53.7 in July.

Even with the advance, each of the major indexes was on pace for a second straight weekly decline.

Volume remained light, as it has been all week.

Investors are also looking ahead to the European Central Bank meeting on Thursday that is expected to take pressure off highly indebted countries. Comments from ECB Executive Board member Benoit Coeure rekindled expectations for central bank action.

SAIC Inc was among the best performers on the benchmark S&P index, up 3.3 percent at $12.20 after the computer contractor reported a drop in second-quarter profit and said it would split its business into two independent public companies.

(Editing by Kenneth Barry)