* Biotech shares reverse course, up by afternoon session
* Consumer confidence hits six-year high in March
* Options on momentum stocks suggest more bullish bets
* Dow up 0.6 pct; S&P 500 up 0.4 pct; Nasdaq up 0.2 pct (Updates to late afternoon)
By Angela Moon
NEW YORK, March 25 (Reuters) - U.S. stocks rose by late afternoon on Tuesday in a volatile session, rebounding from a two-day decline as a strong read on consumer confidence increased optimism about the economy.
The advance in the afternoon was led by the technology sector, which had slipped earlier as the Nasdaq biotech sector index had fallen about 1 percent. By about 3 p.m., the index was down only 0.2 percent after moving quickly in and out of positive territory.
"Anecdotally, it does seem that when there's upside momentum, people jump into risky names, and then they bail fairly quickly when they have concerns," said Randy Frederick, managing director of active trading for Charles Schwab in Austin, Texas.
"I wouldn't say that the market at large is at risk of falling just because these did. There's nothing on the S&P that would make people concerned from a technical perspective. We're well above the 50-day moving average and haven't touched the 200-day in years. So far, fund flows indicate that people aren't leaving equities."
Contributing to volatility, selling pressure has also intensified of late as valuations reach levels not seen in almost a decade. The forward price-to-earnings ratio on the S&P 500 recently hit its highest since early 2005, and is trading above the historical median, according to Thomson Reuters IBES data.
So-called momentum stocks were still down for the day but off their lows, including Netflix, down 2.2 percent at $370.41. Netflix has declined for 14 of the past 15 sessions, falling almost 19 percent over that stretch.
Biotech shares also reversed earlier losses, including Regeneron Pharma, up 0.4 percent at $307.45, and Gilead Sciences Inc, up 1.1 percent at $72.92.
Data showed consumer confidence rose more than expected in March, climbing to its highest level since January 2008. The report was the latest in a string of positive reads on the U.S. economy that supported theories that softness early this year was related to bad weather and not weakening fundamentals.
The Dow Jones industrial average was up 97.58 points, or 0.60 percent, at 16,374.27. The Standard & Poor's 500 Index was up 7.53 points, or 0.41 percent, at 1,864.97. The Nasdaq Composite Index was up 7.31 points, or 0.17 percent, at 4,233.69.
The rebound in some so-called "momentum" names was an indication that while concerns persist about geopolitical tensions in Ukraine and slowing growth in China, investors are not so bearish on equities as to sell them wholesale.
The CBOE Volatility Index, a gauge of investor anxiety, fell 4 percent. The VIX remains at historically low levels.
"Momentum stocks took all the punches Monday, with biotech especially and social media stocks taking a thumping. In short, last year's winners are falling hardest as investors run scared," said Andrew Wilkinson, chief market analyst at Interactive Brokers LLC in Greenwich, Connecticut.
"However, as we look at the pattern of investor interest expressed through options trading, there are few signs that derivative traders are prepared to throw in the towel."
Facebook Inc was the second-most active equity option on Tuesday, with largest open interest seen in $70 calls that expire in April and May. The stock was up 1 percent at $64.77. Call options are generally viewed as bullish bets, expecting the stock to move higher.
Investors continued to watch global issues cautiously. On Monday, major stock indexes fell on concerns that the crisis in Ukraine could escalate, pushing traders to take profits in such high-flying sectors as biotech and Internet shares. Those names rebounded on Tuesday, with some of Monday's biggest decliners topping the list of advancing S&P 500 names.
In the latest on the housing market, U.S. single-family home prices rose slightly more than expected in January, according to the S&P/Case-Shiller composite index of 20 metropolitan areas, while new home sales fell more than expected in February. (Editing by Jan Paschal)