Bank stocks rose Monday in anticipation of news from both Congress and the Obama administration on plans to fix the economy and the financial sector.
The KBW Bank Index rose 2.21%.
Matthew Shields, a trader at FIG Partners LLC, said there was some short covering in bank stocks ahead of the news expected Tuesday from Treasury Secretary Timothy Geithner on how the administration plans on using the second half of the $700 billion bailout program to help troubled banks.
Mr. Shields also said that investors were waiting to see whether Congress passes the economic stimulus legislation this week.
"People just want to remove some of the uncertainty from their portfolios, as no one really knows how the market is going to react" when the details of the plans are known, he said.
Gains were pronounced in some of the more heavily shorted stocks, Mr. Shields said, including Banner Corp. of Walla Walla, Wash., which rose 72 cents, to $3.75 a share; First State Bancorp. in Albuquerque, which rose 34 cents, to $1.34; and Community Bancorp. in Las Vegas, which rose 38 cents, to $1.85.
Bank of America Corp. rose 12.4%, extending the gains it made Friday after Kenneth Lewis, its chairman and chief executive, said in a CNBC interview that it would be "absurd" for the government to nationalize the Charlotte company. Observers also cited reports last week that Mr. Lewis and other insiders had bought more B of A stock.
Other gainers included Citigroup Inc., which rose 1%; U.S. Bancorp, which rose 3.2%; Fifth Third Bancorp, which rose 9.9%; and Regions Financial Corp., which rose 10.5%.
JPMorgan Chase & Co. fell 1.3%, Wells Fargo & Co. fell 0.4%, and UCBH Holdings Inc. fell 8.5%.
The Dow Jones industrial average fell 0.12%, while the Standard & Poor's 500 rose 0.15%.