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US STOCKS-Wall St rallies as traders dial back rate-hike bets

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* U.S. stock indexes eye first weekly gain in four

* Bank stocks mixed after Fed's stress test results

* Indexes up: Dow 1.05%, S&P 1.35%, Nasdaq 1.85% (Updates to market open)

By Sruthi Shankar and Anisha Sircar

June 24 (Reuters) - Wall Street's main indexes rose over 1% on Friday as signs of slowing economic growth and falling commodity prices tempered expectations over how high the Federal Reserve will raise interest rates to rein in inflation.

Global financial markets have been roiled this month on worries that rapid rate hikes by major central banks could cause a recession, with the benchmark S&P 500 confirming a bear market last week as it recorded a 20% drop from its January closing peak.

The three main indexes on Friday looked set to notch their first weekly gain in four, boosted by megacap growth stocks and defensive sectors such as healthcare and utilities seen as safer bets during times of economic uncertainty.

"Conversations about the U.S. economy likely slowing which could lessen the hawkishness of the Fed, combined with lower commodity prices and bond yields - these are reasons investors are mentioning to justify why we could experience a near-term bounce," said Sam Stovall, chief investment strategist at CFRA Research in New York.

"Yet, I do not think that it's the final bottom."

Data on Thursday showed U.S. business activity slowed considerably in June, driving investors to scale back bets on where interest rates may peak and even bring forward expectations of a rate cut.

The University of Michigan's survey on Friday showed U.S. consumer sentiment hit a record low in June.

Sliding commodity prices this week also quelled worries about red-hot inflation, with copper prices heading for their biggest weekly fall in a year and crude oil set for a second weekly decline.

The Fed's commitment to fight high inflation is "unconditional," Chair Jerome Powell told lawmakers on Thursday, a day after saying it was not trying to provoke a recession but that was "certainly a possibility."

All the major 11 S&P 500 sectors gained on Friday, led by gains in technology stocks and communication services with a 2% jump.

Heavyweights Apple Inc (AAPL) and Tesla rose 1.9% and 3.1%, respectively, as U.S. Treasury yields hovered near two-week lows hit on Thursday.

Rising interest rates tend to hurt shares of megacap growth companies as their valuations rely more heavily on future earnings.

At 09:43 a.m. ET, the Dow Jones Industrial Average was up 323.04 points, or 1.05%, at 31,000.40, the S&P 500 was up 51.38 points, or 1.35%, at 3,847.11, and the Nasdaq Composite was up 208.26 points, or 1.85%, at 11,440.45.

FedEx Corp (FDX) jumped 7.2% after the parcel delivery company issued a stronger-than-expected full-year profit forecast despite softening global demand for shipping.

Bank stocks were mixed after the Federal Reserve's annual "stress test" exercise showed that the lenders have enough capital to weather a severe economic downturn.

Citigroup Inc (C) slipped 1.5% and Bank of America Corp (BAC) fell 1.7% lower, while Morgan Stanley (MS) gained 3.1%.

Zendesk Inc (ZEN) soared 29.0% after the software company said it would be acquired by a group of private equity firms led by Hellman & Friedman LLC and Permira for $10.2 billion.

Advancing issues outnumbered decliners by a 5.26-to-1 ratio on the NYSE and a 3.87-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week highs and 29 new lows, while the Nasdaq recorded 18 new highs and 18 new lows. (Reporting by Sruthi Shankar and Anisha Sircar in Bengaluru; Editing by Sriraj Kalluvila)

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