us stocks rallied to session highs in the final hour of trade on tuesday building on mondays rally as anxiety about the banking sector receded and traders looked ahead to whether the federal reserve will raise interest rates on wednesday on monday the dow jones industrial average rose 383 points or 12 to 32245 the sp 500 increased 35 points or 089 to 3952 and the nasdaq composite gained 45 points or 039 to 11676 calmer conditions in the financial sector and us treasury secretary janet yellens reassurances on containing the banking crisis were buoying market sentiment on tuesday treasury secretary janet yellen vowed on tuesday that there will be more us support for small bank depositors if needed but she also told an industry group that the situation is stabilizing after recent moves by the government reports that the us treasury is considering boosting the guarantees on bank deposits was also helping the mood increased investor optimism about the banking system after the rescue takeover of credit suisse csgneb by its longterm rival ubs ubs also helped lift us regional stocks shares of first republic bank frc rallied nearly 42 after losing 47 in the previous session shares of the spdr sp regional banking etf kre which covers the regional banks segment of the broader sp 500 index jumped 54 and was on pace to book its largest daily percentage increase since january 2021 see first republic stock rallies after bank backstop pledge from treasurys yellen and reports of push to raise capital by jpmorgan easing tensions in the financial sector makes it more likely the federal reserve will raise its policy interest rate again on wednesday the fastmoving banking crisis was suddenly setting up a clash for the fed between banking sector stability and price stability while inflation sticks around readthe fed will either pause or hike interest rates by 25 basis points what are the pros and cons of each approach many fed watchers in the market think a 25basispoint increase is the likely outcome theres an 83 chance of a 25basispoint increase to the federal funds rate when the fed wraps its twoday policy meeting on wednesday according to cme groups fedwatch tool the fed can take a cautious approach here and an ultra cautious approach would be to not hike at all and simply wait to see whats going to happen said thierry wizman a global fx and rates strategist at macquarie its important to keep in mind that this banking crisis comes at a time when unemployment is very low in the us and were at least on a backward looking basis referring to coincident indicators like cpi which shows inflation is still high and this is why this decision probably calls for some sort of compromise result which is to do 25 basis points instead of zero wizman told marketwatch on tuesday seefed likely to follow ecbs playbook and hike interest rates this week but theres still many who think the fed will stand pat for now despite the brightening mood surrounding regional banks and yellens remarks that regulators are ready to do whats needed to shore up the financial system that includes peter cardillo chief market economist at spartan capital securities does that cure the present banking turmoil i dont think so cardillo said i think the fed can pause and revisit what inflation looks like in two months he said after this weeks meeting the central banks next federal open market committee meeting is scheduled for may 23 also see fund managers fear a systemic credit event as the biggest threat to markets bank of america others think markets may not be out the woods amid higher interest rates and tighter lending conditions roughly onethird of 212 fund managers polled by bank of america said a systemic credit event is the biggest threat while 25 said persistent inflation is the markets most pressing problem in us economic data existing home sales in february made their biggest leap since july 2020 according to tuesday morning data last month sales climbed 145 to 458 million beating expectations of 42 million in sales housing stocks are trading higher after the data release this content was created by marketwatch which is operated by dow jones  co marketwatch is published independently from dow jones newswires and the wall street journal