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NEW YORK, Aug 31 (Reuters) - U.S. stocks surged on Friday after a speech by Fed Chairman Ben Bernanke spurred speculation for a benchmark interest rate cut next month and President Bush said he would help struggling subprime mortgage borrowers avoid foreclosure.

All three major indexes rose more than 1 percent, led by financial service and energy companies.

Shares of financial services companies rose in thin pre-holiday trade, including Citigroup (C.N: Quote, Profile, Research), the largest U.S. bank, which climbed 1.5 percent to $46.94. Energy company shares were spurred by a rise in crude oil prices.

Bernanke said in a speech at a symposium in Jackson Hole, Wyoming, that the U.S. central bank will take the necessary steps to shelter the economy from turmoil in financial markets but will not bail out investors who made bad decisions.

“We’re of the opinion that the playing field has tilted in investors favor and the odds are extremely good that they will lower rates in September,” said Bruce Zaro, chief technical analyst at Delta Global Advisors, Inc. in Huntington Beach, California.

The Dow Jones industrial average (.DJI: Quote, Profile, Research) was up 170.63 points, or 1.29 percent, at 13,409.36. The Standard & Poor’s 500 Index (.SPX: Quote, Profile, Research) was up 20.59 points, or 1.41 percent, at 1,478.23. The Nasdaq Composite Index (.IXIC: Quote, Profile, Research) was up 30.00 points, or 1.17 percent, at 2,595.30.

President George W. Bush tried to calm financial market turmoil from the credit crisis by announcing proposals intended to prevent homeowners from defaulting on risky mortgages.

Bush urged lenders to work with homeowners to renegotiate their mortgages to prevent default and called on Congress to approve legislation he proposed last year to modernize the Federal Housing Administration, which provides mortgage insurance to borrowers through a network of private sector lenders. But Bush also said it was not the government’s job to bail out “speculators,” a remark that briefly caused stocks to pare gains.

Bush and Bernanke were the market’s main focus, pushing economic data to the back seat. Reports on Friday showed inflation under control in July while U.S. factories were busier than forecast, portraying a resilient economy in little need of an interest rate cut.

But other reports showed U.S. consumer sentiment worsened in August from July, while the outlook for economic growth weakened.

Among bank shares, JPMorgan Chase (JPM.N: Quote, Profile, Research) was up 2 percent at $44.88, while Bank of America Corp (BAC.N: Quote, Profile, Research), the No. 2 U.S. bank, advanced 1.9 percent to $51.15. Financials, along with the home builders, are among shares that have suffered most in the credit market turmoil.

The Dow Jones home builder index (.DJUSHB: Quote, Profile, Research) rose 3.1 percent to $413.03.

Shares of Accredited Home Lenders Holding Co (LEND.O: Quote, Profile, Research) rose almost 40 percent to $8.82 after Lone Star Funds said it was prepared to buy the subprime lender at a lower price than it had previously agreed to, easing fears that the acquisition might fall apart.

Among major oil companies, Exxon Mobil’s (XOM.N: Quote, Profile, Research) shares rose 1.8 percent to $86.91.

By Kristina Cooke

1. Bernanke says Fed will act as needed
US Federal Reserve Chairman Ben Bernanke has pledged Friday that the central bank will “act as needed” to keep the credit crisis that has unhinged Wall Street from hurting the US economy. In anxiously awaited remarks Mr Bernanke did not specify what the Fed’s next move will be but made clear policymakers are keeping close tabs on the problem. Many believe the odds are growing that the Fed will cut its most important interest rate now at 5.25 percent by at least one-quarter percentage point on or before September the 18th its next regularly scheduled meeting. The Fed hasn’t lowered this rate in four years.

2. Bush says markets turmoil will take time to play out
President Bush has announced a package of measures to help homeowners struggling to pay their mortgages amid the subprime loan crisis. Mr Bush said the market turmoil stemming from the problem will take time to play out. But he said the subprime market woes represent only a small part of the economy and would not undermine what he said were sound fundamentals.

3. Hang Seng hits new record high
Hongkong stocks have surged 499 points - or two percent - to end the week at a new record high of 23984. The Hang Seng Index broke above the 24000 level at one stage before falling back. Turnover was $113-billion. Global shares rose sharply following reports that President Bush will announce measures to tackle the US sub-prime crisis and ease fears of a world-wide credit crunch.

4. Hang Seng closes 499 higher
The Hang Seng index has closed at 23984 - that’s 499 up on the previous close. In currencies the American dollar’s trading at 116.19 yen. The euro is standing at 1 American dollar 36 cents. And the pound is worth 15 Hong Kong dollars 70 cents.

5. Hang Seng soars
A short time ago the Hang Seng index was 24002 - that’s 518 up on the previous close. In currencies the American dollar’s trading at 116.30 yen. The euro is standing at 1 American dollar 36 cents. And the pound is worth 15 Hong Kong dollars 72 cents.

6. $76-million reserve price for radio spectrum auction
The government will hold its second auction of radio spectrum in late October or early November with a reserve price of $76-million. The auction will be for spectrum to serve 3G mobile phone services. The winner will have one year to roll out its network. The head of the Office of the Telecommunications Authority Marion Lai denied that the reserve price was low.

7. Hang Seng 407 higher in morning trading
The Hang Seng Index ended the morning at 23892 - that’s 407 up on the last close. Turnover was 57.8 billion dollars.

8. Hang Seng higher
A short time ago the Hang Seng index was 23601 - that’s 117 up on the previous close. In currencies the American dollar’s trading at 116.02 yen. The euro is standing at 1 American dollar 36 cents. And the pound is worth 15 Hong Kong dollars 71 cents.

9. Wall Street closes lower
Business and financial news..Wall Street closed mostly lower this morning as investors braced for a speech that Federal Reserve chairman Ben Bernanke is due to deliver on housing and interest rate policy. The major US stock indexes reflected ongoing volatility as fresh reports of mortgage and credit problems played havoc with investors’ nerves. The Dow Jones Industrial Average finished down 0.38 percent. The broad-market Standard & Poor’s 500 index closed nearly half a per cent down. But the technology stocks fared better as the tech-rich Nasdaq composite ended up 0.08 percent. All this happened despite figures being released that showed the US economy growing at an annual rate of 4 per cent in the second quarter. At the close in Europe London’s FTSE 100 index showed a gain of 1.30; in Frankfurt the DAX 30 added 1.09 percent and the Paris CAC 40 closed 1.31 percent higher.

10. Toys ‘R’ Us recalls colouring cases
The American retail chain Toys “R” Us is recalling 27000 wooden colouring cases that were made in China and sold under its Imaginarium brand. The US Consumer Product Safety Commission said the printed ink on the outer packaging of the case contains lead and some of the black watercolor paint inside contains excessive levels of lead. Lead paint has been linked to health problems in children including brain damage.

11. Hang Seng hits new record high
Hongkong stocks have surged 499 points - or two percent - to end the week at a new record high of 23984. The Hang Seng Index broke above the 24000 level at one stage before falling back. Turnover was $113-billion. Global shares rose sharply following reports that President Bush will announce measures to tackle the US sub-prime crisis and ease fears of a world-wide credit crunch.

12. Hang Seng closes 499 higher
The Hang Seng index has closed at 23984 - that’s 499 up on the previous close. In currencies the American dollar’s trading at 116.19 yen. The euro is standing at 1 American dollar 36 cents. And the pound is worth 15 Hong Kong dollars 70 cents.

13. Hang Seng soars
A short time ago the Hang Seng index was 24002 - that’s 518 up on the previous close. In currencies the American dollar’s trading at 116.30 yen. The euro is standing at 1 American dollar 36 cents. And the pound is worth 15 Hong Kong dollars 72 cents.

14. $76-million reserve price for radio spectrum auction
The government will hold its second auction of radio spectrum in late October or early November with a reserve price of $76-million. The auction will be for spectrum to serve 3G mobile phone services. The winner will have one year to roll out its network. The head of the Office of the Telecommunications Authority Marion Lai denied that the reserve price was low.

15. Hang Seng 407 higher in morning trading
The Hang Seng Index ended the morning at 23892 - that’s 407 up on the last close. Turnover was 57.8 billion dollars.

16. Hang Seng higher
A short time ago the Hang Seng index was 23601 - that’s 117 up on the previous close. In currencies the American dollar’s trading at 116.02 yen. The euro is standing at 1 American dollar 36 cents. And the pound is worth 15 Hong Kong dollars 71 cents.

17. Wall Street closes lower
Business and financial news..Wall Street closed mostly lower this morning as investors braced for a speech that Federal Reserve chairman Ben Bernanke is due to deliver on housing and interest rate policy. The major US stock indexes reflected ongoing volatility as fresh reports of mortgage and credit problems played havoc with investors’ nerves. The Dow Jones Industrial Average finished down 0.38 percent. The broad-market Standard & Poor’s 500 index closed nearly half a per cent down. But the technology stocks fared better as the tech-rich Nasdaq composite ended up 0.08 percent. All this happened despite figures being released that showed the US economy growing at an annual rate of 4 per cent in the second quarter. At the close in Europe London’s FTSE 100 index showed a gain of 1.30; in Frankfurt the DAX 30 added 1.09 percent and the Paris CAC 40 closed 1.31 percent higher.

18. US stocks stumble ahead of Bernanke speech
US stocks closed mostly lower as investors braced for a speech that Federal Reserve chairman Ben Bernanke is due to deliver on housing and interest rate policy. The Dow Jones Industrial Average finished down 50 points at 13238 after plunging over 100 points in morning trading and rebounding back into positive territory briefly. The broad-market Standard & Poor’s 500 index closed 6 points lower at 1457. Technology stocks fared better as the tech-rich Nasdaq composite ended up 2 points at 2565.

19. Toys ‘R’ Us recalls colouring cases
The American retail chain Toys “R” Us is recalling 27000 wooden colouring cases that were made in China and sold under its Imaginarium brand. The US Consumer Product Safety Commission said the printed ink on the outer packaging of the case contains lead and some of the black watercolor paint inside contains excessive levels of lead. Lead paint has been linked to health problems in children including brain damage.

20. Hang Seng closes 463 higher
The Hang Seng Index ended the day at 23484 - that’s 463 up on the previous close. In currenciesthe American dollar’s trading at 115.45 yen. The euro is standing at 1 American dollar 36 cents. And the pound is worth 15 Hong Kong dollars 68 cents.

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