U.S. stocks rallied on Thursday after a consortium of 11 of the biggest U.S. banks banded together to inject $30 billion in capital into troubled bank First Republic (FRC) as the sector works to stave off a broader financial crisis in the wake of multiple bank failures since last Wednesday.

At the closing bell, the S&P 500 (^GSPC) was up 1.7% and the Dow Jones Industrial Average (^DJI) higher by 1.2%, while the tech-heavy Nasdaq Composite (^IXIC) led gains for the session, rising 2.5%.

Late Thursday afternoon, 11 banking giants led by JPMorgan (JPM) and Bank of America (BAC) infused a total of $30 billion of uninsured deposits to First Republic in a move to stabilize the bank, which had been under pressure following last week's failure of peer Silicon Valley Bank while being downgraded by two separate ratings agencies.

"The actions of America’s largest banks reflect their confidence in the country’s banking system," the banks said in a joint release. "Together, we are deploying our financial strength and liquidity into the larger system, where it is needed the most."

Markets had opened lower after the European Central Bank surprised investors with a 0.50% interest rate hike, a move suggesting central banks will remain focused on pushing down inflation the ECB called "too high" in its statement this morning. The Federal Reserve is set to announce its latest policy decision next week.

Stocks accelerated to the upside in late-morning trade, however, following an initial report from the Wall Street Journal which suggested buyers had emerged for First Republic.

Shares of First Republic finished Thursday's session higher by 9%, while the broader sector also rallied, with the KBW Bank Index (^BKX) rising by 2.5%. The KBW Regional Banking Index (^KRX) rose some 3.2%.

Futures had been mixed early Thursday ahead of the ECB's announcement. Wednesday's turmoil in Credit Suisse and a late-night intervention from the Swiss National Bank pushed investors to expect a more modest 0.25% increase from the ECB as central banks weigh financial stability concerns against inflation that remains elevated.

"Inflation is projected to remain too high for too long," the ECB said in its statement. "Therefore, the Governing Council today decided to increase the three key ECB interest rates by 50 basis points, in line with its determination to ensure the timely return of inflation to the 2% medium-term target."

"The Governing Council is monitoring current market tensions closely and stands ready to respond as necessary to preserve price stability and financial stability in the euro area," the statement added. "The euro area banking sector is resilient, with strong capital and liquidity positions."