Bank stocks took wing again on Wednesday as the financial markets rallied on fresh news of a cooling economy and a likely reduction in interest rates.

In afternoon trading, new 52-week highs were established by BankAmerica Corp., up $1 to $68.50, First Union Corp., up $1.25 to $59, Mellon Bank Corp., up $1 to $56.125, and Comerica Inc., ahead 25 cents to $38.25.

New highs were also hit by SunTrust Banks Inc., up 25 cents to $69.625, Fleet Financial Group, up 75 cents to $43, First Fidelity Bancorp., ahead $1.625 to $79.625, and Republic New York Corp., up $1.25 to $65.

Shares of First Bank System Inc., which is dueling with Wells Fargo & Co. to acquire First Interstate Bancorp, rose 50 cents to $52.625.

First Bank late on Tuesday confirmed widespread speculation that it had repurchased large numbers of its own shares in November, but strongly denied that this artificially supported its stock following the bid for First Interstate.

Shares of First Interstate were up $1.75 cents to $139.625 Wednesday afternoon, while shares of Wells Fargo rose $2.125 to $218.50.

The rally in banks and other stocks was spurred by the 0.5% decline in October leading economic indicators, in a report by the Department of Commerce.

Seven indicators fell: average work week, weekly unemployment claims, vendor performance, orders for plant and equipment, building permits, sensitive materials prices, and money supply.

By contrast, only four indicators rose: orders for consumer goods, unfilled orders for durable goods, stock prices, and consumer expectations.

The Federal Reserve's latest appraisal of business conditions, the Beige Book, also released Wednesday, further confirmed that the pace of the economy is slowing.

The two reports caused bond prices to rise and yields to fall. The yield on the 30-year long-term Treasury bond slipped below 6% again, a level it has not reached, save for a brief time, for about two years.

The surge in bond prices added to speculation that the Fed would lower rates for the first time since last July when its monetary policy committee meets on Dec. 19.

"I expect a 50-basis-point rate cut if there is agreement between the President and Congress on the budget, and 25 basis points even if there is no agreement," said C. Frazier Evans, an economist at Colonial Investment Services Inc., Boston.

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