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* Fed announces indexing approach to SMCCF program
* Cyclicals lead gainers
* Moderna up on report Israel in talks to buy its vaccine
* Indexes up: Dow 0.62%, S&P 0.83%, Nasdaq 1.43% (Updates to with closing prices)
By Stephen Culp
NEW YORK, June 15 (Reuters) - Wall Street closed higher on Monday following an announcement by the U.S. Federal Reserve regarding its corporate bond purchasing program that boosted investor confidence, which had been wavering amid a spike in new COVID-19 cases.
All three major U.S. stock indexes reversed losses in afternoon trading, following the Fed's decision to apply an indexing approach to its secondary market corporate credit facility to create a more diversified portfolio.
"No doubt the market liked it: Who doesn't like more cake and ice cream?" said Robert Pavlik, chief investment strategist, senior portfolio manager at SlateStone Wealth LLC in New York.
"It fuels traders to buy individual stocks and take on higher risk because the Fed has backstopped the bond market and kept a tighter lid on interest rates," he added.
A flood of liquidity in the form of fiscal and economic stimulus, along with uneven but steady re-openings of state and local economies, sparked a remarkable rally in the stock market since its late-March trough.
Gains were led by cyclical stocks, with S&P 500 financials enjoying the day's biggest percentage gains.
The S&P 500 Banking index rose 1.6%.
"The banks probably have a bunch of corporate debt on their balance sheets and now there's a buyer for it," Pavlik added. "Someone's going to be buying those bonds because the Fed is telling them it's OK."
But surging new cases of COVID-19 in China, where the pandemic originated, prompted the reintroduction of containment measures, and record hospitalizations in several U.S. states dampened investor risk appetite.
On the flipside, an uptick in China's factory output and a much better-than-expected Empire State manufacturing report gave evidence that the pandemic-hobbled global economy was on the road to recovery.
Earlier, the U.S. Federal Reserve announced it had opened registration for its Main Street Lending program to help businesses weather the storm of mandated lockdowns.
Last week, the central bank provided its first pandemic era outlook, and market participants will be closely following Fed Chair Jerome Powell's testimony this week before Congress for details on the central bank's somber economic projections.
The Dow Jones Industrial Average rose 157.62 points, or 0.62%, to 25,763.16, the S&P 500 gained 25.28 points, or 0.83%, to 3,066.59 and the Nasdaq Composite added 137.22 points, or 1.43%, to 9,726.02.
All 11 major sectors of the S&P 500 closed in the black, led by financials and consumer staples.
Drugmaker Moderna Inc gained 7.4% following a report that Israel is in advanced talks to buy its coronavirus vaccine.
Advancing issues outnumbered declining ones on the NYSE by a 1.97-to-1 ratio; on Nasdaq, a 2.69-to-1 ratio favored advancers.
The S&P 500 posted no new 52-week highs and no new lows; the Nasdaq Composite recorded 46 new highs and 10 new lows.
Volume on U.S. exchanges was 12.31 billion shares, compared with the 12.94 billion average over the last 20 trading days.
Reporting by Stephen Culp; Editing by Cynthia Osterman