* Financials rebound after sell-off
* Energy shares up the most among 11 major S&P sectors
* Dow up 0.85%, S&P 500 up 0.56%, Nasdaq up 0.27% (Updates to mid-afternoon, changes byline)
By Chuck Mikolajczak
NEW YORK, Aug 28 (Reuters) - U.S. stocks advanced on Wednesday, as gains in financial and energy shares helped equities recover from initial declines, but investors remained cautious about the potential for another flare-up in U.S.-China trade tensions.
The financial sector was up 1.06%, clawing back some of the losses from the previous session triggered by a deepening of the U.S. Treasury yield curve inversion, which often precedes a recession.
Gains in the benchmark S&P 500 index were also supported by a 1.75% jump in energy stocks after industry data showed a fall in stockpiles of U.S. crude, boosting oil prices.
The two have been the worst performing of the 11 major S&P sectors in August.
"When you look at both financials and energy being among the worst on a relative strength basis, you could say it is a dead cat bounce," said Sam Stovall, chief investment strategist at CFRA Research in New York.
Investors took some solace in the lack of new developments on the trade front, although the U.S. Trade Representative's office on Wednesday reaffirmed President Donald Trump's plans to impose an additional 5% tariff on a list of $300 billion of Chinese imports starting on Sept. 1 and Dec. 15.
"As the hangman says, no noose is good noose. We are not really hearing anything from the Chinese or from economic data that could really throw us off balance," said Stovall.
Next week, investors will look towards the monthly jobs report and manufacturing data which could guide expectations on the likelihood of another rate cut from the Federal Reserve at its mid-September meeting.
The Dow Jones Industrial Average rose 220.28 points, or 0.85%, to 25,998.18, the S&P 500 gained 16.21 points, or 0.56%, to 2,885.37 and the Nasdaq Composite added 20.77 points, or 0.27%, to 7,847.71.
Another factor potentially proving a lift to stocks was the drop in the 30-year U.S. Treasury yield to below that of the S&P 500 dividend yield, making equities a more attractive income alternative.
Technology stocks dipped 0.12%, pressured by declines in shares of Microsoft Corp and Autodesk Inc .
Shares of the AutoCAD software maker slid 6.9%, the most on the S&P 500, after the company cut its full-year earnings forecast.
Shares of Tiffany & Co rose 3.6% after the luxury jeweler reported quarterly earnings above analysts' estimates.
Coty Inc rose 5.1% after the cosmetics maker raised its full-year revenue forecast, betting on a multi-year turnaround plan that involves increased investments in advertising and cost cuts.
Hewlett Packard Enterprise Co's shares added 3.4% after the company beat profit estimates and raised its 2019 adjusted earnings forecast.
Advancing issues outnumbered declining ones on the NYSE by a 2.66-to-1 ratio; on Nasdaq, a 2.31-to-1 ratio favored advancers.
The S&P 500 posted 7 new 52-week highs and 38 new lows; the Nasdaq Composite recorded 21 new highs and 144 new lows.
Reporting by Chuck Mikolajczak Editing by Sonya Hepinstall