The financial sector rose Tuesday on reports of several deals, showing that

there are still some strong players left in the banking sector, despite housing-related losses, accelerating credit costs and a decline in share prices across the industry.

The NYSE Financial Sector index recently gained 1.3% to 6,404.61 and the KBW Bank index rose 2.9% to 67.92. The Dow Jones Industrial Average increased 0.9% to 11,651.02, with financial stocks like

Bank of America

(BAC) - Get Report

,

AIG

(AIG) - Get Report

,

American Express

(AXP) - Get Report

and

JPMorgan Chase

(JPM) - Get Report

leading the charge, with gains of almost 2% or more.

Bank of America was recently up 4.3% at $32.48 after a Goldman Sachs analyst initiated coverage with a "Buy" rating, citing an outlook for stronger earnings and capital growth relative to its peers.

Regions Financial

(RF) - Get Report

surged 16.4% to $10.79 as the company began operating five former

Integrity Bank

branches. Regions

agreed to assume $900 million worth of its regional competitor's assets after Federal Deposit Insurance Corp. took over the failed bank late last week.

Lehman Brothers

rose again to $16.53, up 2.7%, after Korea Development Bank confirmed reports that it is pursuing a deal to acquire

at least a partial stake in the firm.

IntercontinentalExchange

(ICE) - Get Report

was up 5.6% to $92.98 on buyout news as well. The online exchange for commodities and derivatives said Tuesday it had closed a $513 million acquisition of

Creditex

, a credit-default swap company.

PacWest

(PACW) - Get Report

rose almost 14% to $25.77 after the California bank said it had issued $100 million worth of new stock to

CapGen Financial

.

CapGen will now hold a 12% stake in PacWest and the funds will be used to boost capital levels, retire debt and to "take advantage of growth opportunities as they arise," CEO Matt Wagner said in a statement. PacWest also noted that the price of $26 a share was a 21% premium to its average closing price over the past five trading days.

Government-supported mortgage giants

Fannie Mae

( FNM) and

Freddie Mac

( FRE) rose 2% and 6.7%, respectively, despite a downgrade of their preferred stock ratings. Fitch cut Fannie's preferred stock rating to "BBB-" from "A+" and Freddie's rating to "BBB-" from "A," citing a drop in value of both preferred and common shares.