Geithner's assertion Tuesday that "the vast majority" of banks have enough capital pulled stocks from a slump that began with a sell-off Monday. He also told a congressional oversight committee that some banks would be allowed to repay financial bailout funds with the blessing of bank regulators.
The comments provided reassurance that banks won't surprise investors next month by getting poor marks in the government's "stress tests." The process is designed to determine whether the nation's biggest banks have adequate capital. The results are due May 4.
The gains of more than 1.5 percent in major market indexes Tuesday follow drops of 3-4 percent Monday that punctuated a surge of more than 20 percent since stocks hit 12-year lows in early March.
Some traders were clearly relieved by the comments and used the pullback to buy into the market. Analysts also said some traders were covering bets that stocks would fall.
Stocks fluctuated in morning trading after a string of lackluster earnings reports and forecasts stoked worries about how quickly the economy can recover from a deep recession.
Banks stocks, which led the market lower Monday, bounced back after the Geithner comments. JPMorgan Chase & Co. rose 9.6 percent, Citigroup Inc. jumped 10.2 percent, while Goldman Sachs Group Inc. rose 4.7 percent. Morgan Stanley added 4.8 percent ahead of its quarterly results on Wednesday.
The Dow rose 127.83, or 1.6 percent, to close at 7,969.56.
Broader stock indicators showed the biggest gains. 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 in early trading before ending up 34 cents, or 10.9 percent, at $3.45.
Geithner said the government's bank rescue planby letting taxpayers share the risk with the private sector while at the same time letting private industry use competition to set market prices for the assets.
Geithner wrote in a letter to Elizabeth Warren, head of the Congressional Oversight Panel, that $109.6 billion in resources remain in the government's $700 billion financial rescue fund. Officials expect the fund will be boosted over the next year by about $25 billion as some institutions pay back money they have received.
Even with the move higher Tuesday investors' worries about banks aren't likely to ease soon, some analysts say.
"Nothing has been remedied in the banking sector," said Dave Rovelli, managing director of trading at brokerage Canaccord Adams. "A lot of these banks, they're basically making money only because they're getting money from the government for free."
The turn higher in the market overshadowed mixed results from big-name companies. Bank of New York Mellon Corp., Coca-Cola Co. and drugmaker Merck & Co. posted results or issued forecasts that fell short of what the market expected. Wall Street was uneasy about some of the reports because analysts had set low expectations after a bruising January in which fourth-quarter results short-circuited a stock rally.
Not all financial stocks moved higher. Bank of New York Mellon's first-quarter earnings fell a steeper-than-expected 57 percent. The company said it was slashing its dividend with the goal of repaying what it received from the government's bank rescue. The stock fell 76 cents, or 2.7 percent, to $27.27.
Coca-Cola fell $1.06, or 2.4 percent, to $43.27, after its first-quarter earnings fell 10 percent because of restructuring charges and write-downs. The beverage maker's earnings were in line with Wall Street's expectations but sales fell short.
Merck reported a 57 percent drop in first-quarter earnings because of a slide in both sales of its drugs and income from its partnership on cholesterol medicines. Merck fell $1.54, or 6.1 percent, to $23.68.
Among banks, JPMorgan rose $2.14, or 7.2 percent, to $31.83, while Citigroup rose 29 cents, or 9.9 percent, to $3.23. Goldman Sachs rose $4.86, or 4.2 percent, to $119.87. Morgan Stanley rose 96 cents, or 4.1 percent, to $24.48.
In other market moves, the Russell 2000 index of smaller companies rose 10.61, or 2.3 percent, to 463.10.
About three stocks rose for every one that fell on the New York Stock Exchange, where volume came to 1.2 billion shares.
Bond prices fell. That pushed up the yield on the benchmark 10-year Treasury note to 2.89 percent from 2.84 percent late Monday. The yield on the three-month T-bill rose to 0.15 percent from 0.12 percent Monday.
Light, sweet crude rose 72 cents to $46.60 a barrel on the New York Mercantile Exchange.
The dollar was mixed against other major currencies while gold prices fell.
Overseas, Britain's FTSE 100 slipped 0.1 percent, Germany's DAX index rose 0.3 percent, and France's CAC-40 rose 0.2 percent. Japan's Nikkei stock average fell 2.4 percent.