Oct. 27 (Bloomberg) -- U.S. stocks advanced, paring the worst monthly plunge in 70 years, as the Federal Reserve poured money into regional banks and traders bet on a decline in borrowing costs.

Fifth Third Bancorp, Ohio’s second-biggest bank, and Regions Financial Corp., Alabama’s largest, rallied more than 14 percent. Verizon Communications Inc., the second-biggest U.S. phone company, climbed 8.1 percent for the Dow Jones Industrial Average’s biggest advance after income increased 31 percent.

The Standard & Poor’s 500 Index gained 3.86, or 0.4 percent, to 880.63 as of 10:05 a.m. in New York. The Dow average climbed 58.78, or 0.7 percent, to 8,437.73. The Nasdaq Composite Index added 5.07, or 0.3 percent, to 1,557.1. U.S. stocks tumbled last week, driving the S&P 500 toward the steepest monthly loss since 1938, on concern the global economy is sliding into a recession.

Financial companies led the S&P 500 higher after banks that also included Suntrust Banks Inc. and Capital One Financial Corp. accepted about $28 billion in government cash as the Treasury began the second half of a $250 billion bailout. Retailers also gained after traders increased bets that the Fed will cut its target for overnight loans between banks in half to 0.75 percent.

“A cut would send a positive signal that the Fed remains vigilant in keeping the financial system fluid and flooded with money as the credit markets thaw,” said Mark Luschini, who oversees $1 billion as chief investment officer at Parker Hunter Asset Management in Pittsburgh.

The S&P 500 retreated 6.8 percent to 876.77 last week, the lowest level since April 2003. The benchmark index for U.S. equities plunged 25 percent in October. The Dow average fell 5.4 percent to 8,378.95 last week. The MSCI World Index of 23 developed markets lost 8.3 percent, while Brazil, Russia and India drove a gauge of 25 emerging markets to a 17 percent slump.

To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net.

Last Updated: October 27, 2008 10:09 EDT