Stocks rose on Tuesday after U.S. Treasury Secretary Timothy Geithner said the vast majority of banks are well capitalized, soothing worries over the need for the struggling sector to raise more money.

A forecast from diversified manufacturer United Technologies Corp that it would return to growth next year also provided a boost, even as the bellwether reported a decline in quarterly profit as the recession hurt demand.

Financials were the best-performing sector in the broad S&P 500 index <.SPX> after Geithner said most U.S. banks have enough capital to keep lending, but bad debts are slowing a recovery.

Geithner's testimony before a Congressional panel came the day after fears about the results of government stress tests on the adequacy of banks' capital levels dragged down bank shares as the market posted its biggest drop since March 5.

There was concern that the stress tests might indicate that a lot of the banks needed additional capital, but his comment was that the majority of banks are adequately capitalized, said Bucky Hellwig, senior vice president at Morgan Asset Management in Birmingham, Alabama.

The Dow Jones industrial average <.DJI> rose 62.84 points, or 0.80 percent, to 7,904.57. The Standard & Poor's 500 gained 9.64 points, or 1.16 percent, to 842.03. The Nasdaq Composite Index <.IXIC> climbed 18.43 points, or 1.15 percent, to 1,626.64.

Investors also digested another round of quarterly results, including reports from five blue-chip companies. Merck & Co Inc and Coca-Cola Co were the Dow's biggest drags after both companies said sales were feeling the effects of the global slowdown.

Merck was down 6 percent at $23.72, while Coke fell 2.2 percent to $43.34.

The technology sector saw another day of M&A activity after chipmaker Broadcom Corp made an unsolicited bid to buy Emulex Corp . On Monday, Oracle Corp said it would buy Sun Microsystems Inc .

Broadcom was down 9 percent at $19.85, while Emulex surged 43 percent to $9.45.

Shares of United Tech, the world's largest maker of elevators and air conditioners, rose 4.3 percent to $47.79 and led gains in the Dow industrials after the company beat profit expectations and said that although order rates remained down there were signs of stabilization, especially in China.

The KBW bank index <.BKX> rose 4.7 percent, reversing earlier declines after Geithner's comments, with Bank of America Corp up 8.5 percent at $8.70, and Wells Fargo & Co gaining 8 percent to $18.33. The Obama administration has said results of the stress tests will be released on May 4.

Citigroup Inc jumped 9.5 percent to $3.22 after Chief Executive Vikram Pandit said he expects the bank to rebound from its current woes and repay every dollar it owes the U.S. government.

(Reporting by Leah Schnurr; editing by Jeffrey Benkoe)