US STOCKS-S&P 500 set to recover $1 trillion in value as virus deaths slow

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* Utilities lead gains among major S&P 500 sectors

* Banks stocks track Treasury yields higher

* Volatility index falls to two-week low

* Indexes surge: Dow 5.68%, S&P 5.61%, Nasdaq 5.56% (Updates to early afternoon)

By Uday Sampath Kumar and Shreyashi Sanyal

April 6 (Reuters) - The S&P 500 was on track to recover about $1 trillion in market value in a furious rally on Monday after a drop in the daily death toll in New York, the country's biggest coronavirus hot spot, raised hopes that the pandemic could level off soon.

All three main stock indexes jumped more than 5%, with the blue-chip Dow Industrials adding 1,200 points. Defensive utilities sector led with big gains, while consumer staples and real estate - also considered safe bets during times of volatility - rose between 3% and 8%.

The S&P 500 banking index jumped 7.2% and was set for its best day in more than a week. Bank of America, Citigroup, Wells Fargo and JPMorgan advanced between 5.8% and 8.8%, tracking Treasury yields.

"All the market cares about right now is the virus and any positive event will see some buyers coming in," said Dennis Dick, proprietary trader, at Bright Trading LLC in Las Vegas.

"With New York City numbers getting better on the weekend, people are happy that we may be closer to the top of the peak than we thought."

Still, U.S. officials have girded the country for a "peak death week" from the pandemic, with the death toll topping 10,000.

Wall Street's fear gauge fell to its lowest in two weeks, but analysts cautioned against calling a bottom. During the financial crisis of 2007-08, the S&P 500 took months to establish a bottom even after the volatility index plummeted.

Despite Monday's bounce, the S&P 500 remains nearly 20% - or $6 trillion in market value - short of its all-time high in mid-February.

"It's a big stretch to try to extrapolate a reduction in the number of cases into when we're going to be able to get back to work," said Robert Pavlik, chief investment strategist at SlateStone Wealth LLC in New York.

"People are still going to be very hesitant to go into restaurants and bars."

S&P 500 companies are expected to enter an earnings recession in 2020, with declines in profit in the first and second quarters, according to IBES data from Refinitiv, as demand evaporates across sectors including airlines, luxury goods and industrials.

At 1:16 p.m. EDT, the Dow Jones Industrial Average was up 1,196.52 points, or 5.68%, at 22,249.05, the S&P 500 was up 139.72 points, or 5.61%, at 2,628.37.

The Nasdaq Composite was up 410.13 points, or 5.56%, at 7,783.22.

Versace owner Capri Holdings surged 28% after saying it expects to open its stores after June 1 and that it would furlough all its 7,000 employees in North America.

Video conferencing app Zoom fell 6.5% on concerns over its data privacy practices and increased competition from deep-pocketed rivals.

Advancing issues outnumbered decliners by a 9.45-to-1 ratio on the NYSE and by a 6.01-to-1 ratio on the Nasdaq.

The S&P index recorded two new 52-week highs and no new low, while the Nasdaq recorded six new highs and 23 new lows. (Reporting by Uday Sampath, Shreyashi Sanyal and Medha Singh in Bengaluru; Editing by Sagarika Jaisinghani, Sriraj Kalluvila and Saumyadeb Chakrabarty)