Bank stocks rebounded Wednesday after Tuesday's big selloff on worries that the government may not be doing enough to salvage the banking industry.
The KBW Bank Index rose 6.02%. The index had fallen 13.85% Tuesday, dragged down by investor concerns over the lack of details given by Treasury Secretary Timothy Geithner on how the federal government would use the second half of its Troubled Asset Relief Program funding to shore up banks with bad assets.
Anthony Conroy, the head trader at Bank of New York Mellon Corp.'s BNY ConvergEx Group, said the bank stocks rebounded from investors' overreaction to Mr. Geithner's comments.
"America doesn't want to have ambiguity," Mr. Conroy said, "but there was a tremendous amount of selling yesterday, and the whole financial group … was a bit oversold."
Gains in the sector were across the board. Among the large-cap banking companies, JPMorgan Chase & Co. rose 6%, Citigroup Inc. 10.2%, Bank of America Corp. 9.2%, and Wells Fargo & Co. 7%.
The chief executives from all those companies, plus four others, testified Wednesday before the House Financial Services Committee, telling its members that their companies were, indeed, using the funds they received under the Tarp program to make loans.
The gainers Wednesday included U.S. Bancorp, up 4.1%; PNC Financial Services Group Inc, 10.4%; Regions Financial Corp., 13.6%; Marshall & Ilsley Corp., 13%; and SunTrust Banks Inc., 11.3%.
The broader markets fluctuated Wednesday but rebounded after news that key lawmakers had agreed on the economic stimulus bill. Both the House and Senate are expected vote on the final bill this week. The Dow Jones industrial average closed up 0.64%, and the Standard & Poor's 500 index rose 0.8%.