Shares of banks and other financial institutions rose sharply amid hopes for a sustained turnaround in stock and bond markets.
There were large in-flows of investor capital into bonds and financial stocks in the latest survey from analysts at brokerage Bank of America Securities, in a note to clients.
A large impetus for stock gains is a change in the outlook for Federal Reserve rate hikes, said one strategist.
"Even though every Fed speaker has been out, saying 'no it's not over, we're continuing to fight inflation,' the market is saying, 'we understand you're not done, but you won't be as aggressive,'" said Quincy Krosby, chief global strategist at brokerage LPL Financial.
Fed funds futures markets are now pricing in a 50-basis-point increase at the central bank's September meeting rather than the 75 basis points previously anticipated.
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(END) Dow Jones Newswires