US STOCKS-Wall St rebounds after drop, but set for worst week in 8

* Indexes up: Dow 0.54 pct, S&P 0.39 pct, Nasdaq 0.43 pct

By Chuck Mikolajczak

NEW YORK, Sept 26 (Reuters) - U.S. stocks were higher in afternoon trading on Friday, with major indexes staging a rebound from their biggest drop since July on the back of data showing the economy expanded in the second quarter.

Data showed the economy grew at its fastest pace in 2-1/2 years in the quarter while a separate report showed consumer sentiment hit its highest level in 14 months in September.

Major indexes saw their biggest declines since July 31 on Thursday in a broad selloff, with the S&P 500 falling through a key technical support level as Apple (NasdaqGS: AAPL - news) slumped and the dollar hit a four-year high.

"The GDP report was just a confirmation of the rebound in the second quarter, and that is all because the first quarter was so dismal, so it evens out there," said Ian Kerrigan, global investment specialist at JP Morgan Private Bank in Seattle.

"The markets are pretty cautious about being overvalued right now, which is a good thing. It is good to have some skepticism out there, so if the market can be patient and wait for earnings, which it looks like they are doing, that is going to be a positive."

The gains put the S&P 500 just below its 50-day moving average of around 1,976, which may now act as a technical resistance point. The index fell below that level for the first time since Aug. 15 in the prior session.

The Dow Jones industrial average was rising 91.16 points, or 0.54 percent, to 17,036.96, the S&P 500 was gaining 7.57 points, or 0.39 percent, to 1,973.56 and the Nasdaq Composite was adding 19.43 points, or 0.43 percent, to 4,486.18.

For the week, the Dow is down 1.6 percent, the S&P is off 2 percent and the Nasdaq is 2.1 percent lower, which would mark the worst weekly performance for each index in the last eight.

Nike (Sao Paolo: NIKE34.SA - news) shares were trading up 9.8 percent to $87.59 as the biggest boost to the Dow, after the world's largest sportswear maker reported a better-than-expected quarterly profit.

The largest percentage gainer on the New York Stock Exchange was Janus Capital (NYSE: JNS - news) , up 32.58 percent after it said PIMCO founder Bill Gross would join the company. The largest decliner was GrafTech, down 10.10 percent.

Advancing issues were outnumbering declining ones on the NYSE by 1,812 to 1,151, for a 1.57-to-1 ratio on the upside; on the Nasdaq, 1,544 issues were rising and 1,064 falling for a 1.45-to-1 ratio favoring advancers.

The benchmark S&P 500 index was posting 7 new 52-week highs and 11 new lows; the Nasdaq Composite was recording 29 new highs and 77 new lows. (Editing by Bernadette Baum)