The KBW Bank Index rose 3.11% Monday as investors grew more confident about the sector.
"It could be possible that long-term investors realized the worst may be over at least for the large-cap banks," speculated Cassandra Toroian, the president and chief investment officer at Bell Rock Capital LLC in Rehoboth, Del.
Gains went across the board.
JPMorgan Chase & Co. rose 0.6%; Bank of America Corp., 4.6%; Wells Fargo & Co., 3.2%; PNC Financial Services Group Inc., 2.3%, and U.S. Bancorp, 1.5%.
Among the regional banking companies, SunTrust Banks Inc. rose 5.3%; BB&T Corp., 3.6%; KeyCorp, 5.5%; Comerica Inc., 4.8%; Zions Bancorp., 13%; Fifth Third Bancorp, 2.2%, and M&T Bank Corp., 3.5%.
First Niagara Financial Group Inc.'s shares rose 6.6% after the $11.6 billion-asset company said it had agreed to buy the $5.6 billion-asset Harleysville National, in Pennsylvania, for $237 million. Harleysville's shares soared 37.8%.
Some banking companies declined, including Citigroup Inc., off 4 cents a share, to $2.69, and Colonial BancGroup Inc., down 13 cents, to 59 cents a share.
The Dow Jones industrial average fell 0.7%, but the Standard & Poor's 500 index rose 0.3%.
The Commerce Department said Monday that June new-home sales rose 11% from May, to 384,000. However, June's median sales price fell 5% from the month before and 12% from a year earlier, to $206,200.