Despite strong gains in the broader markets, financial stocks rose only modestly in Thursday's trading.

The KBW Bank Index closed up for the third straight day, gaining 1.75%. The Dow Jones Industrial Average rose 2.76%, to close at 7,975.85, after trading above 8,000 for the first time since Feb. 9. The Standard and Poor's 500 index was up 2.86%.

Bank stocks rose sharply in the morning after the Financial Accounting Standards Board eased rules requiring banks to value their assets at market prices.

Good news from the manufacturing sector buoyed the overall market; the Commerce Department announced that factory orders grew in February for the first time in seven months. The rally extended the momentum from Wednesday's trading, when investors were cheered by better-than-expected forecasts for home and automobile sales.

Mani Sadeghi, the managing partner of the New York private-equity firm Equifin Capital Partners, said investors are so far looking favorably on FASB's relaxation of mark-to-market accounting. The changes, which let banks avoid writing down distressed securities and loans, should help banks curb short-term losses, he said.

By contrast, Sadeghi said that giving banks more flexibility in valuing assets will not do much to strengthen them in the long term. Altering accounting standards does not affect a company's underlying business, he said.

Matthew Shields, a trader at FIG Partners LLC, agreed that the FASB rule changes may have helped drive up bank stocks in early trading. But it is no surprise that bank stocks later lost ground, he said.

"Banks have had a pretty strong charge" in recent days, Shields said. "To see them take a breather is not strange. We're expecting a pretty quiet run for the banks. Maybe even a pullback from here."

JPMorgan Chase & Co. rose 0.25%, Bank of America Corp. 2.7%, U.S. Bancorp 4.49%, Bank of New York Mellon Corp. 0.07%, Wells Fargo & Co. 5.87% and Citigroup Inc. 6 cents, to $2.74 a share.

Regional banks had a similar showing: SunTrust Banks Inc. was up 6.66%, PNC Financial Services Group Inc. 5.7%, City National Corp. 2.08%, Zions Bancorp 7.61% and Bank of Hawaii Corp. 2.13%.

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