At the 4.15pm (AEST) close, the benchmark S&P/ASX200 index had lifted 81.3 points, or 2.21 per cent, to 3,752.9, while the broader All Ordinaries index added 80.5 points, or 2.23 per cent, to 3698.0.
IG Markets institutional dealer Chris Weston said financial stocks were driving the local market buoyed after United States bank Goldman Sachs posted better than expected first quarter earnings and announced a capital raising to pay back half its $US10 billion ($13.71 billion) bailout funds from the US government.
"That's where we're seeing the strength today - investors are really coming into stocks trying to get a bit more beta (stocks moving more than the overall market) in their portfolio," he said.
Commonwealth Bank rose 96 cents to $36.56, ANZ jumped 70 cents to $17.32, NAB improved 62 cents to $22.47 and Westpac advanced 67 cents to $20.67.
Resources were also stronger as the day ended.
BHP Billiton rose 59 cents to $33.04 and Rio Tinto climbed $2.94 to $56.74.
Energy stocks were up.
Oil and gas producer Woodside Petroleum was 63 cents stronger at $39.32 and Santos found 28 cents at $16.88.
Steel maker OneSteel was in a trading halt pending an announcement on its financial outlook. OneSteel last traded at $2.56.
National carrier Qantas closed 4 cents higher at $2.00 after earlier plunging to an intraday low of $1.74. Qantas slashed its annual pre-tax profit forecast and flagged up to 1750 more job cuts after a rapid decline in trading conditions.
Mr Weston said there had already been plenty of negative news in the aviation sector and more bad news had been largely anticipated by institutional investors.
"I think there was a bit of a knee-jerk reaction and people bought back because they saw a bit of value from those lows," he said.
On Wall Street overnight, the Dow Jones Industrial Average index fell 25.57, or 0.32 per cent, to 8057.81.
On the Sydney Futures Exchange, the June share price index futures contract was up 34 points at 3756 on volume of 21,776 contracts, according to preliminary calculations.
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