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A security guard stands outside of the entrance of the Silicon Valley Bank headquarters, in Santa Clara, Calif., on March 13.BRITTANY HOSEA-SMALL/Reuters

Bruised U.S. bank stocks regained some ground on Tuesday, as a sell-off sparked by Silicon Valley Bank’s collapse gave way to bargain-hunting by investors hopeful that efforts to shore up confidence would avert a wider financial crisis.

Regulatory scrutiny of SVB’s demise last week – the largest U.S. bank failure since the 2008 financial crisis – intensified with the U.S. Justice Department opening a probe, a source familiar with the matter said. The Securities and Exchange Commission has launched a parallel investigation, according to the Wall Street Journal.

SVB’s shutdown on Friday – followed two days later by the collapse of New York-based Signature Bank – has roiled global markets, forced U.S. President Joe Biden to rush out assurances that the financial system is safe and prompted emergency U.S. measures giving banks access to more funding.

Fears of possible contagion have eased – but not been fully dispelled.

An indicator of credit risk among euro zone banks hit its highest level since mid-July on Monday, while ratings agency Moody’s cut its outlook on the U.S. banking system to negative from stable citing a “rapid deterioration in the operating environment.”

The VIX volatility index, Wall Street’s “fear gauge,” neared six-month highs overnight. But U.S. regional bank shares – which have been hit hardest so far – nudged up on hopes the worst of the market rout is over.

The S&P 500 regional banks index rebounded 1.4%, leaving it with a 26% loss over the past five sessions. First Republic Bank surged 27%, while KeyCorp jumped over 7%. Among large U.S. banks – where sources say customers have moved deposits to over the past week – Citigroup regained almost 6% and Wells Fargo added 4.6%.

“If we do not see any high-profile failures in the near future, then the fears would subside,” said Jack Ablin, chief investment officer at Cresset Capital.

Hedge fund Citadel helped send a signal of confidence in the sector by buying a 5.3% stake in Western Alliance Bancorporation , which was among lenders swept up in contagion fears.

There were other signs of a change in mood. Anson Funds, which manages $1.6 billion, bought an undisclosed number of shares of First Republic on Monday, associate portfolio manager Rob Mills told Reuters. CNBC reported that billionaire investor Ron Baron said he “modestly increased” his position in broker Charles Schwab to take advantage of a double-digit sell-off.

In Europe, where some see lenders as less vulnerable, the banking index recovered to rise 2.5% after posting its biggest percentage loss in over a year on Monday.

Asian banking stocks had extended their declines overnight, with Japanese banks hard-hit despite reassurances from the Bank of Japan about their capital buffers.

A furious race to reprice interest rate expectations also buffeted markets as investors bet the U.S. Federal Reserve will be reluctant to hike next week.

Traders currently see a 77% chance of a 25 basis-point increase at the meeting, while expectations for no rate hike have fallen to 23%. Early last week, a 25 basis-point hike was fully priced in, with a 70% chance seen of 50 basis points.

Short-end yields in the euro zone tumbled again as investors bet the European Central Bank would moderate its policy tightening at Thursday’s meeting, with chances of a Bank of England hike next week also seen receding.

U.S. Treasury yields rose on Tuesday, a day after major declines, as investors consolidated positions and weighed the monetary policy impact of banking system turmoil against stubbornly high inflation.

Analysts say uncertainty continues to dog the financial sector. Investors are worried about the health of smaller global banks, the prospect of tighter regulation and authorities’ preference for protecting depositors before shareholders.

As markets adjusted to the impact of SVB’s collapse, regulars turned their focus to the circumstances around the bank’s collapse. The Justice Department investigation is in early stages and may not result in allegations of wrongdoing or charges being filed, a source said.

Officials are also examining stock sales by officers of SVB Financial Group, which owned the bank, the WSJ reported, citing people familiar with the matter.

Spokespeople for the SEC, SVB and the Justice Department declined to comment.

The Republican head of the U.S. House Financial Services Committee, Patrick McHenry, sought to shore up support for the banking system, saying that both the FDIC and the Fed had acted within the law. He said he still planned to hold a hearing and review documents, although no date was announced.

New York’s financial regulator said its decision to close Signature Bank had “nothing to do with crypto” and instead cited “a significant crisis of confidence in the bank’s leadership” after SVB’s demise.

Signature and three former top executives were also sued on Tuesday by shareholders who accused the bank of fraudulently claiming it was financially strong a mere three days before it was seized by a state regulator. Signature did not immediately respond to requests for comment.

Apollo Global Management Inc, Blackstone Inc, and KKR & Co Inc have expressed interest in a book of loans held by SVB, Bloomberg News reported on Tuesday, citing people familiar with the matter.

The portfolio is seen as an attractive buy and was not a contributing factor in run that caused SVB’s demise, it added.

Buyout giants Ares Management ARES.N and Carlyle Group CG.O are also looking to buy the loan book, the Financial Times reported, citing people familiar with the matter.

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