(Reuters) - U.S. stocks bounced for a second day on Friday as Group of Seven nations moved to calm markets rattled by Japan's nuclear crisis and oil prices fell after Libya said it would cease military actions.

In a move to reassure markets anxious about the nuclear crisis in quake-ravaged Japan, the Bank of Japan bought billions of dollars to restrain a soaring yen and were followed by U.S. and European central banks.

Brent crude oil reversed course, falling 0.6 percent to under $114.19 in volatile trading after Libya accepted a U.N. resolution for immediate ceasefire and agreed to halt all military action against rebels.

"The market is going to rally," said Stephen Massocca, managing director at Wedbush Morgan in San Francisco. "That (Mideast unrest) quieting down and Japan quieting down will lead to buying."

The Dow Jones industrial average .DJI rose 139.03 points, or 1.18 percent, at 11,913.62. The Standard & Poor's 500 Index .SPX added 14.26 points, or 1.12 percent, at 1,287.98. The Nasdaq Composite Index.IXIC gained 25.50 points, or 0.97 percent, at 2,661.55.

The yen fell broadly, with the dollar gaining about 3 percent against the currency. The yen's sharp rise in the aftermath of the crisis threatened to aggravate Japan's economic woes by stalling exports from the world's third largest economy.

Financial stocks rose after the Wall Street Journal reported the largest U.S. banks will be notified Friday whether they passed a second round of stress tests, allowing them to raise their dividends.

JPMorgan Chase & Co (JPM.N) added 1.5 percent to $45.24, while Well Fargo (WFC.N) climbed 1.6 percent to $31.86.

Industrial shares rose, helped by renewed bets they could benefit in Japan's rebuilding effort. General Electric Co (GE.N) rose 2.7 percent to $19.74, while Caterpillar (CAT.N) rose 1.9 percent to $105.09

Japanese engineers conceded that burying a crippled nuclear plant in sand and concrete -- the method used to seal huge leakages from Chernobyl in 1986 -- may be a last resort to prevent a catastrophic radiation release.

Global equities continued to snap back after heavy losses. The FTSEurofirst 300 index of top European shares .FTEU3 was up 0.7 percent, while Japan's Nikkei average .N225 ending up 2.7 percent.

(Additional reporting by Chuck Mikolajczak; editing by Jeffrey Benkoe)

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