U.S. stocks rallied Tuesday as crucial inflation data came in line with expectations. Regional bank stocks surged, clawing back some of their losses in the wake of the Silicon Valley Bank fallout.

The S&P 500 (^GSPC) added 1.3%, while the Dow Jones Industrial Average (^DJI) advanced 1%. Contracts on the technology-heavy Nasdaq Composite (^IXIC) increased 2%.

Bond yields moved higher. The yield on the benchmark 10-year U.S. Treasury note ticked up to 3.6% Tuesday morning from 3.54% Monday. The front end of the yield curve, two-year yields rose 4.2%. Oil prices sunk, with crude oil (CL=F) down trading at $71.50.

February's Consumer Price Index (CPI) showed prices rose 6.0% in February over the last year, the smallest increase since September 2021, and in line with economist expectations. Meanwhile, core CPI, which strips out food and energy, grew 5.5%, also in line with expectations.

The shelter component of CPI — which makes up about a third of the overall inflation index — rose 0.8% over the last month and 8.1% on a yearly basis in February. This data from the BLS differs from real-time data from Redfin, which shows the rental market has started to cool off.

The economic data comes at a critical moment in the Federal Reserve's fight against inflation, as the collapse of Silicon Valley Bank and the ongoing ramifications have added a new wrinkle.

On Wednesday, the Commerce Department will release February’s retail sales print revealing how much was spent at stores, online, and at restaurants. Meanwhile, February’s producer-price index, which measures what suppliers are charging businesses, will be out the same day.

Investors continued to be glued to the latest headlines over the collapse of SVB Financial Group (SIVB) and the implications for the banking sector. The Securities and Exchange Commission and the Justice Department are investigating the closure of Silicon Valley Bank, the Wall Street Journal reported.

Bank sentiment rebounded for members of the KBW Bank index (^BKX), as the index rose nearly 3% Tuesday. Large-cap index members including Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (C) all traded higher.

Other regional bank stocks rallied, including First Republic Bank (FRC), which surged nearly 30% Tuesday morning following a record plunge on Monday. PacWest Bancorp (PACW), Western Alliance Bancorporation (WAL), Regions Financial (RF) and Zions Bancorporation (ZION) jumped on Tuesday.

The question remains: Who will be a contender to scoop up SVB’s remaining assets following the FDIC’s takeover? The FDIC was hoping to sell the bank’s assets on Sunday but instead created a bank to store SVB’s deposits and announced that depositors would be made whole.

Meanwhile, the market will likely be “wrestling” with the Fed’s path as it has to “weigh financial stability” vs. “inflation risks,” according to the US Market Intelligence team at JPMorgan.

So far, market participants are quickly shifting their expectations over the Fed’s next move. Data from CME Group shows that 80% of traders are expecting a 25-basis-point-rate hike at the Fed's March meeting, while 20% anticipate rates unchanged, a dramatic shift from last week.

Also, the Fed said it would conduct a review of the fallout of Silicon Valley Bank. The results will be publicly released by May 1, the central bank said on Monday. The review will be led by Michael Barr, the Fed vice chair for supervision.

“The events surrounding Silicon Valley Bank demand a thorough, transparent, and swift review by the Federal Reserve,” Fed Chair Jerome Powell said in a statement.

In other single-stock moves, KeyCorp (KEY) advanced nearly 7% Tuesday after tumbling in the previous trading session. Credit Suisse Group AG (CS) shares remained down, while Charles Schwab (SCHW) stock rebounded.

Here are the stocks trending on Yahoo Finance:

• GitLab (GTLB): The company reported a weaker revenue forecast for the fiscal first quarter and year, missing analysts’ expectations.

• Meta (META): Chief Executive Officer Mark Zuckerberg said the company is laying off an additional 10,000 workers to hedge against economic instability.

• Boeing (BA): The aerospace giant has secured an order from two Saudi Arabian airlines — state-owned and new national player Riyadh Air — totaling 78 planes to purchase with 43 options to purchase more, Yahoo Finance's Brian Sozzi reported.

• Uber (UBER): A California court ruled that drivers can be treated as independent contractors rather than employees.

• 3M Company (MMM): The stock is trading lower amid litigation involving faulty earplugs, a downbeat Q4, and a guidance miss for 2023.

• AMC Entertainment (AMC): The company said given a preliminary tally shareholders voted in favor of increasing the firm's stock authorization and converting AMC Preferred Equity Units into common shares.

On the earnings front, FedEx (FDX), Adobe (ADBE), Dollar General (DG), and Lennar (LEN) will report quarterly results this week.

Elsewhere, in the crypto market, Bitcoin (BTC-USD) soared over 15% to over $25,000 in the past 24 hours amid SVB and Signature Bank fallout. Bitcoin gained 37% this year, outperforming the S&P 500 by a factor of 10 times, according to Valkyrie research.

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Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv

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