Shares of Cityscape Financial Corp. stabilized Thursday after taking massive hits in exceptionally heavy trading earlier in the week.

The subprime mortgage lender's stock hit a 52-week low of $10.125 on Wednesday, on record volume of 4.067 million shares, but closed Thursday up 44 cents, at $10.56, following a reassuring report by a sector analyst.

Ted Hu with New York-based Williams Capital reiterated his "buy" rating on the stock, saying that the recent selloff was "unwarranted."

Mr. Hu said that the stock will rebound to $15 as soon as the company "tells a better story about what it can do to position itself for better growth." His yearend target is $20.

Company executives said they were surprised by the nosedive in Cityscape's stock, which has traded as high as $36.50 in the last year. In a press release they said they knew of no reason for the sudden downturn.

Most market observers attributed it to an announcement Monday that the company was reviewing all of the loans made by its U.K. subsidiary, City Mortgage. The unit, along with 70 other lenders, has been given a warning by the Office of Fair Trade about high prepayment penalties and other "deceitful and oppressive" terms.

The company had disclosed in its second-quarter earnings release that it would set aside a $9 million reserve anticipating lower returns from its U.K. business.

Some analysts dismissed this concern. But others said the long-term outlook could be negative.

Short interest on the stock is so high, one analyst said, that investors cannot even find any stock to short. In addition, Cityscape's residual assets and servicing rights are being overvalued in financial statements, the analyst said.

The trouble at Cityscape seems not to have spread in the sector. Shares of First Plus Financial Group, Dallas, closed yesterday at $43.75, up $3.75 for the week. Delta Financial Corp., Elmsford, N.Y., closed Thursday at $19.93, up $1.06 since Monday's close.

Separately, the subprime auto loan industry got a vote of confidence from a recently promoted Prudential Securities analyst.

High consumer demand for financing will persist, said the analyst, Mary Rhei. Ms. Rhei, 30, succeeded Michael Durante, who left earlier this month for Salomon Brothers.

She will be covering specialty finance and subprime auto and credit card lending. Ms. Rhei, who joined Prudential in March, previously was with CS First Boston, where she worked with analyst Samuel Liss covering specialty finance.

Bank stocks had a uneventful day, with most up slightly by Thursday's close.

Economic data released in the morning generally reassured investors, said Mark Zandi, economist with Regional Financial Associates.

U.S. consumer prices rose a seasonally adjusted 0.2% in July. Initial claims for state unemployment insurance rose 12,000 for the week ending Aug. 9, and business inventories took their biggest jump in two years, to a seasonally adjusted level of $1.026 trillion.

"The most important report today is the consumer price index," Mr. Zandi said. "It says that inflation is not a problem, the Federal Reserve can remain on hold for a while, and interest rates can remain low."

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