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* 10-yr yield reaches four-month high of 3.07 pct
* Two-yr yield hits highest in over a decade
* Financials top boost to S&P, techs biggest drag
* Microsoft dips after MS says dividend hike disappoints
* Indexes: Dow up 0.50 pct, S&P 0.14 pct; Nasdaq off 0.12 pct
(Updates to open)
By Shreyashi Sanyal
Sept 19 (Reuters) - The S&P 500 and the Dow Jones Industrials Average rose on Wednesday, as bank stocks gained on rising Treasury yields, while a drop in Microsoft pressured the Nasdaq.
The benchmark 10-year U.S. Treasury yield US10YT=RR moved back above the symbolic 3 percent mark on Tuesday and hit its highest in four months early on Wednesday, while two-year rates US2YT=RR reached 2.8 percent, the highest in over a decade. US/
The KBW bank index .BKX was up 1.22 percent.
"Given the relatively quiet morning, investors will likely begin to look at bonds to find direction in equity markets," said Andre Bakhos, managing director at New Vines Capital LLC in Bernardsville, New Jersey.
Morgan Stanley (NYSE: MS ) said Microsoft's dividend hike was below its 12-month trailing growth in operating income, likely disappointing some investors.
Six of the 11 major S&P sectors were higher.
Investors have largely shrugged off this week's latest moves by the United States and China to tax imports from either country, and all three major U.S. indexes closed higher on Tuesday. Dow Industrials .DJI were boosted by trade-sensitive Caterpillar (NYSE: CAT ) CAT.N , up 2 percent. But rate-sensitive utilities .SPLRCU fell 0.73 percent, the most among the 11 major S&P sectors.
By 10:00 a.m. ET, the Dow Jones Industrial Average .DJI was up 129.92 points, or 0.50 percent, at 26,376.88, the S&P 500 .SPX was up 3.95 points, or 0.14 percent, at 2,908.26 and the Nasdaq Composite .IXIC was down 9.81 points, or 0.12 percent, at 7,946.30.
Among news-driven stock moves, Praxair (NYSE: PX ) PX.N rose 4.8 percent after Reuters reported that German industrial gases group Linde LIN1.DE was to sell additional assets to gain U.S. approval for the pair's planned merger. Networks JNPR.N climbed 2.1 percent after Nomura upgraded shares of the network gear maker. The brokerage said it expected a return to growth for the company's cloud business.
Data showed U.S. homebuilding increased more than expected in August, a positive sign for a housing market which has underperformed the broader economy amid rising interest rates for loans. issues outnumbered decliners by a 1.56-to-1 ratio on the NYSE. Advancing issues outnumbered decliners by a 1.52-to-1 ratio on the Nasdaq.
The S&P index recorded 26 new 52-week highs and one new lows, while the Nasdaq recorded 29 new highs and 27 new lows.
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