* S&P 500 coming off biggest one-day drop in two months
* SanDisk rallies, Goldman adds to Conviction Buy list
* Dow up 0.3 pct, S&P 500 up 0.2 pct, Nasdaq up 0.1 pct (Updates to early afternoon)
By Caroline Valetkevitch
NEW YORK, March 11 (Reuters) - U.S. stocks inched higher on Wednesday, rebounding from the previous day's selloff, but investors continued to focus on when the Federal Reserve would adjust its rate policies.
Wall Street fell sharply on Tuesday, with the S&P 500 suffering its biggest one-day decline in two months, surpassing a selloff of similar magnitude on Friday, on the increasing view the Fed may raise interest rates as soon as June.
S&P financials, up 0.9 percent, led gains on the S&P 500, after being among the biggest drags in Tuesday's session.
"The reason the Fed would raise rates is because growth dynamics are picking up, which would ultimately be a tailwind for markets, though markets will likely challenge that view with volatility," said Jeremy Zirin, chief equity strategist of wealth management at UBS in New York.
Sandisk Corp rose 4.8 percent to $84.01 after Goldman Sachs added the company to its "Conviction Buy" list. Express Inc rose 2 percent to $15.25 after fourth-quarter earnings and sales topped expectations.
At 1:02 p.m., the Dow Jones industrial average rose 44.37 points, or 0.25 percent, to 17,707.31, the S&P 500 gained 3.25 points, or 0.16 percent, to 2,047.41 and the Nasdaq Composite added 3.77 points, or 0.08 percent, to 4,863.56.
The U.S. dollar index stayed strong Wednesday, up 1 percent. It has risen in five of the past six sessions, up more than 4 percent over that period. The euro fell 1 percent to a 12-year low.
The recent weakness took the Dow and S&P into negative territory for the year on Tuesday. Still, the S&P is just 3.3 percent from a record close hit earlier this month.
It is also near its 100-day moving average of 2,040.27. If it breaks below that level, that could signal weak medium-term momentum.
Advancing issues outnumbered declining ones on the NYSE by 1,661 to 1,298, for a 1.28-to-1 ratio; on the Nasdaq, 1,514 issues rose and 1,113 fell, for a 1.36-to-1 ratio.
The S&P 500 was posting 9 new 52-week highs and 15 new lows; the Nasdaq Composite was recording 54 new highs and 70 new lows. (Editing by Chizu Nomiyama and Nick Zieminski)