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REFILE-US STOCKS-Wall Street ends green as Fed officials soothe bank jitters

(Refiles to fix spelling in headline)

By Stephen Culp

NEW YORK, March 24 (Reuters) -

U.S. stocks closed higher on Friday, marking the end of a tumultuous week as U.S. Federal Reserve officials calmed investor fears over a potential liquidity crisis in the banking sector.

While all three major U.S. stock indexes started the session sharply lower on the heels of a sell-off among European banks, those losses reversed by closing bell, repeating the intraday roller coaster ride of recent sessions.

At the conclusion of a volatile week, marked by a Fed interest rate hike and mounting worries over the health of the banking system, all three indexes notched weekly gains.

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"Equity markets drifted higher as concerns lingered about another banking flare up in the U.S. or abroad," said David Carter, managing director at JPMorgan Private Bank in New York. "Wall Street is taking its cues from Washington and other capitals as it relates to interest rates and banking regulations."

In separate appearances, three regional Fed bank presidents said that their confidence that the banking system was not facing a liquidity crisis is what led to the decision to implement a 25 basis point policy rate hike on Wednesday.

But while Fed officials continue to see additional rate hikes as a strong possibility, financial markets are now favoring the likelihood of a no hike at all at the conclusion of its next policy meeting in May.

"The Fed may be jaw-boning a bit as it says more rate increases may be coming this year," JPMorgan's Carter added. "It helps both their inflation goal and suggests confidence in our economic system."

Worries over potential contagion beyond regional banks threatening to spread to their larger peers was sparked by a sell-off of European bank shares.

That sell-off was prompted by the rising cost of insuring Deutsche Bank's debt, expressed by its credit default swaps, coming on the heels of the state-sponsored buyout of Credit Suisse, has fed into the narrative of sector-wide stress.

But those worries eased by mid-afternoon.

While the S&P Bank index ended modestly lower, the KBW Regional Bank index closed sharply higher.

According to preliminary data, the S&P 500 gained 22.63 points, or 0.57%, to end at 3,971.35 points, while the Nasdaq Composite gained 36.76 points, or 0.31%, to 11,824.16. The Dow Jones Industrial Average rose 137.48 points, or 0.43%, to 32,242.73.

U.S.-traded shares of Deutsche Bank slid.

Shares of large U.S. banks JPMorgan Chase & Co and Wells Fargo pared their losses but ended lower, while Bank of America flipped green.

Regional lenders PacWest Bancorp, Western Alliance Bancorp and Truist Financial Corp also reversed earlier dips, but First Republic Bank closed red.

Activision Blizzard jumped after the UK competition regulator dropped some competition concerns in the Microsoft-Activision deal. (Reporting by Stephen Culp; Additional reporting by Amruta Khandekar and Ankika Biswas in Bangalore Editing by Marguerita Choy)