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* 10-yr yield reaches four-month high of 3.07 pct
* Two-yr yield hits highest in over a decade
* Financials top boost to S&P, techs biggest drag
* Microsoft dips after MS says dividend hike disappoints
* Indexes: Dow up 0.50 pct, S&P 0.14 pct; Nasdaq off 0.12 pct (Updates to open)
By Shreyashi Sanyal
Sept 19 (Reuters) - The S&P 500 and the Dow Jones Industrials Average rose on Wednesday, as bank stocks gained on rising Treasury yields, while a drop in Microsoft pressured the Nasdaq.
The benchmark 10-year U.S. Treasury yield moved back above the symbolic 3 percent mark on Tuesday and hit its highest in four months early on Wednesday, while two-year rates reached 2.8 percent, the highest in over a decade.
The S&P financial sector rose 1.06 percent, lifted by a 1.5 percent increase in shares of JPMorgan & Chase.
The KBW bank index was up 1.22 percent.
"Given the relatively quiet morning, investors will likely begin to look at bonds to find direction in equity markets," said Andre Bakhos, managing director at New Vines Capital LLC in Bernardsville, New Jersey.
The technology sector dropped 0.39 percent, led by a 1.2 percent decline in Microsoft.
Morgan Stanley said Microsoft's dividend hike was below its 12-month trailing growth in operating income, likely disappointing some investors.
Six of the 11 major S&P sectors were higher.
Investors have largely shrugged off this week's latest moves by the United States and China to tax imports from either country, and all three major U.S. indexes closed higher on Tuesday.
The Dow Industrials were boosted by trade-sensitive Caterpillar, up 2 percent. But rate-sensitive utilities fell 0.73 percent, the most among the 11 major S&P sectors.
By 10:00 a.m. ET, the Dow Jones Industrial Average was up 129.92 points, or 0.50 percent, at 26,376.88, the S&P 500 was up 3.95 points, or 0.14 percent, at 2,908.26 and the Nasdaq Composite was down 9.81 points, or 0.12 percent, at 7,946.30.
Among news-driven stock moves, Praxair rose 4.8 percent after Reuters reported that German industrial gases group Linde was to sell additional assets to gain U.S. approval for the pair's planned merger.
Juniper Networks climbed 2.1 percent after Nomura upgraded shares of the network gear maker. The brokerage said it expected a return to growth for the company's cloud business.
Data showed U.S. homebuilding increased more than expected in August, a positive sign for a housing market which has underperformed the broader economy amid rising interest rates for loans.
Advancing issues outnumbered decliners by a 1.56-to-1 ratio on the NYSE. Advancing issues outnumbered decliners by a 1.52-to-1 ratio on the Nasdaq.
The S&P index recorded 26 new 52-week highs and one new lows, while the Nasdaq recorded 29 new highs and 27 new lows. (Reporting by Shreyashi Sanyal in Bengaluru; editing by Patrick Graham and Sriraj Kalluvila)