Major bank stocks were battered last week, although a rally Friday softened the blows.

The outlook for this week is uncertain, with analysts' forecasts divided between a rebound and a continued selloff.

Some investors will probably lighten their bank stock holdings. But the lower share prices may entice other investors into the market, pushing prices back up.

That's what happened Friday. The Ameircan Banker index of 225 bank stocks was up 1.2% for the day, but was off 3.3% for the week.

By comparison, the Dow Jones industrial average was off modestly last week.

Rsponse to Rising Rates

Analysts said that investors last week dumped bank stocks in reaction to rising interest rates and the selloff in the bond market.

Bank stocks are largely seen as interest sensitive.

Friday's gains came as buyers stepped in to take advasntage of what they saw as blue-light specials.

But those increases in share prices didn't come close to erasing the previous four days of losses.

First Union Corp. was up 25 cents to $38.125 in Friday afternoon trading, but down 6.8% for the week. MBNA Corp. was up 12.5 cents to $31.75, but down 6.6% for the week.

Bank of Boston was up 87.5 cents to $22.50 but down 5.3% last week. Bankders Trust New York Corp. was ahead 75 cents to $75.50 on Friday but down 4.9% for the week.

Among the large West Coast banks, First Intestate Bancorp. surged $1.375 to $55.50 on Friday, but was still down 4.7% for the week.

"I think you simply have a lot of pople trimming back on the bank stocks for several reasons at the same time," said Christoper Marinac, an analyst in Atlanta for Interstate/Johnson Lane. "Despite the strong earnings, there is still a perception among portfolio managers that 'the show is over' for bank stocks," he added.

Some investors have been "overweighted" in the bank stocks for more than two years and may be moving back to more traditional levels, he said, believing the stock prices already reflect the impact of falling interest rates and improved credit quality.

"They are paring back regardless of the earnings, and that is why on some days right now it appears everybody [among banks] is geeting hurt," said Mr. Marinac.

At the same time, with year-end approaching, many money managers want to take gains where they can.

"Everybody wants to lock in performance, said Anthony J. Polini of Mabon Securities Corp., New York. "This [bank stock] group still has a lot of grains on paper and nobody wants to take chances with that,"Big Declines 2 p.m. % decrease price from Oct. 29 First Union $37.875 -6.8% MBNA 31.75 -6.6 Bank of Boston 22.25 -5.3 Bankers Trust 75.375 -4.9 First Interstate 55.375 -4.7Source: Reuters

Mr. Polini said he did not know how else to account "for such a strong selloff," even taking account of the better tone in Friday's market.

In some cases, he noted, one big institutional seller has been able to push down prices sharply. Buyers, on the other hand, tended to bide their time more, awaiting developments.

"The reaction to rising rates was overdone, again," said Mr. Polini, just as market reactions to the falling rates last summer were too dramatic.

Mr. Marinac and Mr., Polini both said they felt bond traders, like bank investors, were also locking in results from a good year, cuasing the recent fall in some credit market prices.

"If I had told you a year ago we would have a 6.20% [yield on the 30-year Treasury] long bond, you would say that would be good for bank stocks -- but, of course, not if the rate were on the rise from 5.80%" he said.

Mr. Marinac said he felt the banks could "lag the rest of the year." With that in turn setting up a "nice January effect" when soem major investors get back into the game in eanest.

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