By Chuck Mikolajczak NEW YORK, Nov 2 (Reuters) - U.S. stocks rose on Monday after another round of solid economic reports, but pulled off session highs after a Fed official's warning about banks' loan losses. The three major indexes had previously risen about 1 percent earlier in the session as stronger-than-expected data on manufacturing and pending home sales spurred a broad-based advance and soothed worries over the recovery's strength. [ID:nN02437173] Industrial and materials stocks rose after the solid numbers on manufacturing activity, with the S&P Industrials index .GSPI and the S&P Materials index .GSPM both rising 1 percent. However, a Federal Reserve official's critical comments about banks' potential losses on commercial real estate loans caused investors to sell some financial shares. Stocks still managed to close the session with solid gains, but could not maintain earlier momentum. "The market has turned from buying on dips to selling on rallies," said Terry Morris, senior vice president and senior equity manager for National Penn Investors Trust Company in Reading, Pennsylvania. Ford Motor Co (F.N) shares jumped 8.3 percent to $7.58 after the automaker posted a quarterly profit, topping Wall Street's estimates for a loss as it cut costs and gained market share, prompting it to boost its 2011 outlook to "solidly profitable" from break-even. [ID:nN02411585] In testimony on Monday, Jon Greenlee, the associate director of the Fed's Division of Banking Supervision and Regulation, said U.S. banks are at risk for sizable new loan losses, particularly on commercial property, and some banks may not have enough capital to fully cushion against setbacks. For details, see [ID:nN02443852] On Tuesday, the Federal Reserve is set to begin its two-day policy meeting. The KBW Banks index .BKX rose 0.9 percent, well off its earlier high that had driven it up more than 3 percent. Citigroup Inc (C.N) shares fell 2.4 percent to $3.99.

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