Bank stocks enjoyed what one trader called a "monster" late-day rally Tuesday to turn a disaster into a small triumph.

Concerns about European debt problems and escalating tension between North and South Korea sent stocks spiraling down at the market's opening, with the Dow Jones industrial average dropping 2.7% at one point in the first hour of trading, sliding below 10,000. The Standard & Poor's 500 index lost 3.1% and the KBW Bank Index slid 3.6% around the same time.

A surge in the last two hours of trading made a major difference, with the Dow off only 0.23% and the S&P edging up 0.04%. The KBW Bank Index bounced back for a 1.03% gain.

Tim Curran, a bank trader at Morgan Keegan & Co. Inc., a unit of Regions Financial Corp. of Birmingham, Ala., said it appeared as though the midday valuations, particularly for large regional banks, fell low enough to lure buyers who had previously been on the sidelines. "Everything was so beaten up," he said.

"Valuations are getting back on top of tangible book, so they're looking more attractive," Curran said, though he added a word of caution. "I'd be hesitant myself, but am still encouraged that people are seeing levels where they want to get back in the game."

Jeff Davis, a managing director at Guggenheim Partners unit Guggenheim Securities LLC, was also cautiously optimistic. "We're seeing people begin to price in risk again," he said.

"We got back to a level that made sense last fall and it kept going," Davis said. "But in a sense it isn't all that bad. The banks have raised a lot of capital, taken significant losses and built reserves, and the economy is gaining some altitude."

Consumer news was mixed Tuesday.

The Standard & Poor's/Case-Shiller 20-city home price index rose 2% in the first quarter from a year earlier, though the index slid 0.5% in March compared with a month earlier.

And the Conference Board's consumer confidence index rose for the third consecutive month, climbing to 63.3 in May from 57.7 last month.

Gainers included KeyCorp in Cleveland, up 3.7%, SunTrust Banks Inc. in Atlanta, up 3.58%, and Regions, up 3.47%.

Decliners included Whitney Holding Corp. in New Orleans, down 2.76%, M&T Bank Corp. in Buffalo, down 0.72%, and Huntington Bancshares Inc. in Columbus, Ohio, down 0.67%.

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