Bargain-hungry buyers sent bank stocks back up Wednesday.

"The selloff earlier in the week was overdone, plus you have takeover speculation in these stocks" heading into the Memorial Day weekend, said Michael A. Plodwick of Lehman Brothers.

From the past few summers investors have learned that "any weekend you hang out the flag raises the possibility of a banking deal," Mr. Plodwick said.

But some market observers doubted any rally in the banking industry is sustainable while higher interest rates remain a threat.

"We saw a recovery today, but anything can take a bounce," said Frank W. Anderson, a banking industry analyst at Samco Capital Markets in Dallas.

In contrast to the steep price slide on Monday and Tuesday, most banks advanced Wednesday. The Standard & Poor's bank index was up 3.76%, and Nasdaq banks rose 0.37%.

Some of the largest banks tallied major gains. Bank One Corp. of Chicago improved 3.82%, to $57.6875, while J.P. Morgan & Co. of New York, rose 4.37%, to $138.875. Bank of New York Co. was up 6.83%, to $36.1875, while Wells Fargo & Co. was up 7.82%, to $41.375.

Among regionals, Zions Bancorp. in Salt Lake City was up 1.86%, to $61.5625, but Fifth Third Corp. slipped 0.65%, to $66.875.

First Union Corp. in Charlotte, N.C., whose stock plunged more than 8% Tuesday, managed a small gain after losing ground most of the day. The shares were up 1.11%, to $45.625.

First Union rocked the investment community Tuesday by announcing for the second quarter in a row that it would not meet profitability estimates. It cited difficulties in integrating its acquisitions.

"The First Union situation has led investors to wonder who might be next," Mr. Anderson said.

Regarding rates, he said the biggest question is the strength of a prospective recovery in overseas economies.

"I'm a believer that the Federal Reserve really doesn't want to raise rates, but more demand for capital from an overseas recovery could put pressure on rates. And in a rising rate environment, bank stocks do not do as well as bank earnings."

If rates spike up, bank stocks will be damaged, he said. If they rise more gradually, "banks will go through fits and starts."

Lehman Brothers on Wednesday upgraded National Commerce Bancorp. of Memphis, to "buy," from "accumulate." Mr. Plodwick noted that its stock had recently slipped 11% in value in the wake of an offering, making the shares a good investment opportunity. Its shares rose 0.27%, to $23.0625. u

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