Updated from 3:28 p.m. EDT

Banks and brokerages enjoyed a rally even as one insurer took a nosedive.

The overall market jumped while the NYSE Financial Sector index popped more than 6.3% to 2,582.16. The

Dow Jones Industrial Index

advanced 208.91 to 7,139.31.

It became official that the country's biggest bank, based on assets, is now

Bank of America

(BAC) - Get Report

. BofA jumped 15% in afternoon trading to $5.67. It also benefited from its

Merrill Lynch

brokerage arm's agreeing to a $7 million settlement with the

SEC

over charges that it gave day-traders access to confidential information, thus removing the uncertainty of the situation.

BofA CEO Ken Lewis said his bank was in better shape than

Citigroup

(C) - Get Report

, which is now the third-largest bank according to the report issued by SNL Financial. Citi shares gained 13 cents to sell at $1.67.

JPMorgan Chase

(JPM) - Get Report

came in at the No. 2 position on the report, although it is No. 1 in deposits. Shares of JPM increased 13.7% to $23.20.

Elsewhere, regional banks joined in the rally even though ratings agency

Moody's

said it was reviewing the bank financial strength ratings for 23 regional banks for a possible downgrade. It is also looking at the deposit and debt ratings of 17 banks in this group for downgrades. The KBW Bank Index ticked up 11.2% to 25.96.

The big winners in this group included

KeyCorp

(KEY) - Get Report

, which was up 13.23% to $7.96;

SunTrust Banks

(STI) - Get Report

, up 16.4% to $13.06; and

Marshall & Ilsley

( MI), up 10.6% to $4.80.

Online broker

E*Trade

(ETFC) - Get Report

tumbled 10% in early trading after a Citigroup analyst initiated coverage with a sell rating. It was recently flat at 66 cents.

This analysis comes on the heels of a Fox-Pitt Kelton analyst that suggested on Wednesday that his stress test revealed that E*Trade would need more capital.

Skittish investors initially took down the major online brokers with both

TD Ameritrade

(AMTD) - Get Report

and

Charles Schwab

(SCHW) - Get Report

losing slightly in early trading even though Citigroup initiating coverage on Schwab at buy and TD Ameritrade at hold. The stocks managed to reverse course and gain value in the afternoon. TD Ameritrade added 64 cents to trade at $12.79, and Schwab rose 71 cents to sell at $13.89.

But it wasn't all good for the financials.

Mortgage insurer

MGIC

(MTG) - Get Report

plunged 30.7% to 86 cents after it filed an 8K with the SEC post-market close on Wednesday. In the filing, the company stated it was deferring interest payments that were due to paid on April 1. This triggered concern about the company's capital position, resulting in the selloff.

Fortunately, the rest of the insurers, with the exception of

AIG

(AIG) - Get Report

, managed to stay in positive territory for the day.