Feb. 5 (Bloomberg) -- U.S. stocks erased losses, rebounding from the biggest two-day drop since March, as consumer credit dropped less than forecast and investors speculated the European Union may come up with a solution for Greece’s budget deficit.

Cisco Systems Inc. and Intel Corp. had the biggest gains in the Dow Jones Industrial Average as the 30-stock gauge recovered from a 167-point slide. Alcoa Inc. and Freeport-McMoRan Copper & Gold Inc. led commodity producers to the biggest gains among 10 groups in the Standard & Poor’s 500 Index as oil, gold and copper rebounded in electronic trading following the close of commodities exchanges.

“The markets are expecting a positive announcement out of the European Union this weekend as it relates to Greece and their debt,” said John Brady, Chicago-based senior vice president with the interest rates product group at MF Global Ltd. “Although it’s unclear whether Greece will be bailed out, some in the market think the EU has no choice.”

The S&P 500 climbed 0.2 percent to 1,064.92 at 3:35 p.m. in New York after sliding as much as 1.8 percent. The Dow rose 0.53 points, or less than 0.1 percent, to 10,002.71. The MSCI World Index of equities in 23 developed nations slumped 1.1 percent. It earlier extended its drop since Jan. 14 to more than 10 percent, marking a so-called correction.

To contact the reporters on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net.

Last Updated: February 5, 2010 15:37 EST