Bank stocks bounced back Wednesday from their fearful fall of the previous few days, prompting cautious optimism from veteran analysts.
The Standard & Poor's bank index rose 0.19% while the Dow Jones industrial average fell 0.27%.
"The banks trade on economic expectations. We need to see from the next economic data coming out whether last week's big report was an aberration or a foretelling of something else," said Norman Jaffe of Fox-Pitt Kelton Inc.
Financial markets have been in turmoil since the release Friday of an employment report for February that was far stronger than expected. Banks suffered disproportionately.
"From Thursday through Tuesday, money-center banks were down 5.7%, regional banks 4.8%, and the credit card issuers 6.5%, while the Standard & Poor's 400 was down just 1.8%," Mr. Jaffe said. "But we remain optimistic."
Offering a similar view, Sally Pope Davis of Goldman, Sachs & Co. said her firm still expects banks to perform in line with the market this year, based on the prospect of moderate economic growth.
"There is a tremendous amount of investor confusion about the strength of the economy right now," she noted. "If the economy is stronger than believed, that is good for bank earnings but also means investors move toward other stocks."
But most analysts and economists anticipate that new data arriving today and tomorrow will confirm a moderate economic growth path.
"A couple of statistics have gotten people all excited," said John J. Mason of Interstate Johnson Lane. "I think the economy is going to keep moving ahead, but at a modest rate, which is good for banks."
In other developments, Fleet Financial Group was upgraded to "buy" from "neutral" by Anthony R. Davis of Dean Witter Reynolds Inc. He cited recent stock underperformance and good earnings expectations. The stock rose 12.5 cents to $39.50..
Salomon Brothers Inc. raised CitFed Bancorp, the Dayton, Ohio, thrift company, to "buy" from "hold," based on valuation. The stock was up $1, to $34.75.
