NEW YORK - Treasury Secretary Timothy Geithner persuaded Wall Street to give banks another chance yesterday.
Geithner's assertion that "the vast majority" of banks have enough capital pulled stocks from a slump that began with a sell-off Monday and spilled over into yesterday morning. Geithner also told a congressional oversight committee that some banks would be allowed to repay bailout funds with the blessing of bank regulators.
The comments signaled that banks might not get poor marks in government "stress tests" designed to determine whether banks have enough capital to survive if the economy turns even worse. The results are due May 4.
Bank stocks, which led the market lower Monday, bounced back after Geithner's comments.
The fortunes of bank shares have largely dictated the stock market's direction since the fall of Lehman Brothers Holdings Inc. in September.
The Dow rose 127.83, or 1.6 percent, to 7,969.56. The Standard & Poor's 500 index rose 17.69, or 2.1 percent, to 850.08, and the Nasdaq composite index rose 35.64, or 2.2 percent, to 1,643.85.
Huntington Bancshares Inc. logged one of the more notable turnarounds. The regional bank fell as much as 26 percent before ending up 34 cents, or 10.9 percent, at $3.45.
The jump in most banks overshadowed mixed results from big-name companies. Coca-Cola Co. and drugmaker Merck & Co. posted results or issued forecasts that fell short of what the market expected. Analysts had already set low expectations after a bruising January in which fourth-quarter results short-circuited a stock rally.
Coca-Cola fell $1.24, or 2.8 percent, to $43.09, after its first-quarter earnings fell 10 percent because of restructuring charges and write-downs. Its earnings were in line with expectations but sales fell short.
Merck reported a 57 percent drop in first-quarter earnings because of a slide in sales of its drugs and income from its partnership on cholesterol medicines. Merck fell $1.68, or 6.7 percent, to $23.54.
Investors moved into shares of Caterpillar Inc., DuPont and United Technologies Corp. after their reports.
Construction equipment maker Caterpillar posted better-than-expected earnings but reduced its forecast. Caterpillar rose 91 cents, or 3 percent, to $31.39.
DuPont, of Wilmington, said its first-quarter profit dropped on falling demand. The chemical company also cut its full-year forecast. DuPont rose $1.32, or 4.9 percent, to $28.06.
United Technologies rose $2.18, or 4.8 percent, to $47.99 after the parent of Otis elevators posted results that were in line with expectations and reiterated its full-year forecasts.
Among banks, JPMorgan rose $2.84, or 9.6 percent, to $32.53, while Citigroup rose 30 cents, or 10.2 percent, to $3.24. Goldman Sachs rose $5.35, or 4.7 percent, to $120.36. Morgan Stanley rose $1.13, or 4.8 percent, to $24.65.