Updated from 4:43 p.m. EDT

Stocks in New York rose Tuesday as the banks turned around following remarks from Treasury Secretary Tim Geithner, who indicated that most have sufficient capital to weather the financial downturn.

The Dow Jones Industrial Average rose 127.83 points, or 1.6%, to 7969.56, while the S&P 500 added 17.69 points, or 2.1%, to 850.08. The Nasdaq climbed 35.64 points, or 2.2%, to 1643.85.

Internet company Yahoo! ( YHOO) reported an expected dip in earnings and revenue after the close, and said it would cut 5% more of its workforce in its ongoing restructuring to deal with a decline in online ad spending. Shares rose 5.3% in the regular session and were recently rising about 1.4%.

The banks were at the forefront of gains on the Dow, with Bank of America ( BAC) adding 9.2%, Citigroup ( C) tacking on 10.2% and JP Morgan Chase ( JPM) rising 9.6%.

Geithner, who testified in Washington on the government's financial-stabilization efforts, helped investors worry less about a mixed bag of earnings and a series of downbeat forecasts. The major indices started the week with a selloff, losing 3% to 4% Monday. Financials in particular were hammered after BofA earnings.

While stocks didn't appear in much of a mood to rebound as the current session began, the indices improved after the Treasury secretary testified on Capitol Hill. The KBW Bank index closed up 8.1%, after Geithner said that some indicators "generally suggest improvements in confidence in the stability of the system and some thawing in credit markets" and asserted the "vast majority" of U.S. banks are adequately capitalized.

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