Story updated to include closing prices.

NEW YORK (

TheStreet

) -- Shares of

Bank of America

(BAC) - Get Report

rose 17% Tuesday to close at $7.60 as bank stocks pared the preceding week's losses.

The

Dow Jones Industrial Average was back over 11,000

, as investors reacted to the Federal Reserve's open market committee's statement that

short-term rates would likely remain at their historically low levels through the middle of 2013

and financial names pared losses, following Monday's market slide in the wake of

S&P's downgrade of its long-term debt rating for the United States

, along with

additional downgrades of government-sponsored enterprises

and

insurers

.

The

KBW Bank Index

(I:BKX)

rose 7% to close at 39.58, with all 24 index components rising for the session.

Citigroup

(C) - Get Report

also saw a significant recovery, with shares rising 14% to close at $31.82, following Monday's 16% decline.

Also rising 8% were

Regions Financial

(RF) - Get Report

, which closed at $4.78;

SunTrust

(STI) - Get Report

, closing at $19.98;

U.S. Bancorp

(USB) - Get Report

, at $23.37;

New York Community Bancorp

( NYB), at $12.42; and

Wells Fargo

(WFC) - Get Report

, which closed at $24.78, following a

ratings upgrade to "Outperform" from FBR analyst Paul Miller

.

Large banks seeing shares rise 8% on Tuesday included

Capital One

(COF) - Get Report

, which closed at $40.82, after the Wall Street Journal reported that the company was nearing a deal to purchase

HSBC's

(HBC)

U.S. credit card portfolio.

Shares of

JPMorgan Chase

(JPM) - Get Report

rose 7% to close at $36.40, recovering some of Monday's 9% decline.

Large banks seeing shares rise 6% on Tuesday included

Cullen/Frost Bankers

(CFR) - Get Report

, which closed at $49.99;

Fifth Third Bancorp

(FITB) - Get Report

, at $10.55;

KeyCorp

(KEY) - Get Report

, at $6.92; and

Huntington Bancshares

(HBAN) - Get Report

, which closed at $5.23.

Huntington was among

three bank dividend names recommended by Oppenheimer analyst Terry McEvoy

.

The private mortgage insurers also saw significant recoveries, with

PMI Group

( PMI) up 12% to close at 3 cents, following Monday's 16% gain. The shares tanked 75% last week on word that its main private mortgage subsidiary was undercapitalized.

MGIC

(MTG) - Get Report

rose 24% to close at $2.35, recovering a bit from Monday's 41% decline. The shares dropped 20% last week.

Radian

(RDN) - Get Report

was up 29% to close at $2.56, recovering from Monday's 28% decline. The shares sank 13% last week.

American International Group

(AIG) - Get Report

-- which also operates in the private mortgage insurance space -- was up 6% to close at $23.98, following Monday's 10% decline. AIG's shares were down 13% last week.

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A Chill Pill for Long Term Stock Investors >

--

Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here:

Philip van Doorn

.

To follow the writer on Twitter, go to

http://twitter.com/PhilipvanDoorn

.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.