U.S. equities closed higher on Wednesday as bank stocks led the charge.
The Dow Jones industrial average jumped about 140 points with Goldman Sachs contributing the most gains. Caterpillar was the best-performing stocks in the index, rising 2.4 percent.
"A part of the equity rise today is to make up for what the markets thought to be excess pessimism," said Komal Sri-Kumar, president of Sri-Kumar Global Strategies.
The S&P 500 advanced 0.88 percent with financials rising 1.54 percent to lead advancers. The index also notched its biggest one-day gain since late April.
The SPDR S&P Bank exchange-traded fund (KBE), which tracks large banks, spiked 1.4 percent higher as investors braced for the release of the Federal Reserve's stress test results.
Analysts expect several big banks to come out of the test with substantial increases in return to shareholders — potentially using cash reserves to pay out more than 100 percent of their profits. As a result, higher figures would also reflect banks' confidence in their own financial health.
"This is the first time we've seen deregulation come into play, which is the banks below $250 billion don't have to pass the qualitative test anymore. That pressure taken off gives them a lot of flexibility to ask for more capital deployment," Marty Mosby, director of bank and equity strategies at broker-dealer Vining Sparks, told CNBC's "Closing Bell."
Shares of JPMorgan Chase and Goldman Sachs both climbed more than 1 percent.