Cheery views of the government's latest consumer price report sent bank stocks soaring Tuesday.

The Standard & Poor's bank stock index rose 2.8%, outpacing the Dow Jones industrial average, which was up 0.64%.

The banks were helped by what many described as a benign inflation report, which quelled fears that interest rates are heading higher.

Bank of America Corp. rose $2.125, to $64.625; Chase Manhattan Corp. $2.75, to $83; and Citigroup Inc. $1.3125, to $47.625.

Among regional banking companies, Comerica of Detroit added $1.0625, to $56.6875; Mellon Bank Corp. of Pittsburgh 81.25 cents, to $34.0625; and Zions Bancorp. of Salt Lake City $1.8125, to $55.875.

Bank investors were taking their cue from government figures that showed the consumer price index gained 0.3% in July, in line with economists' expectations. The index's core rate, which does not include the volatile food and energy components, rose 0.2%, a rate seen as tempering inflationary pressures.

"Inflation is remaining subdued at this point," said Deborah E. Johnson, senior economist with Deutsche Banc Alex. Brown. When the Federal Reserve perceives a possible rise in inflation, it is prone to raise interest rates.

The consumer numbers, when combined with last week's benign producer price index, should go a long way to quiet investors' anxieties, market experts said.

"There has been an unjustified fear that inflation will return in a meaningful way," said Joseph Battipaglia, chairman of investment policy at Gruntal & Co. "In turn, this would require even higher interest rates down the road, thereby pushing the economy in a recessionary direction."

Bank stocks opened higher and continued gaining ground, while the Dow declined throughout the morning. Bank stocks gave back some of their gains in the afternoon, but managed to stay in positive territory. The decline of the Dow earlier in the day was because of a sharp drop in Hewlett- Packard, a component of the index, whose earnings report fell short of analysts' expectations. But late in the day the Dow rebounded sharply, but still lagged the S&P bank stock index.

"This is like a relief rally" for bank stocks, said Thomas Finucane, a bank stock analyst with John Hancock Funds in Boston. "All these numbers seem to make the bond market happy, and with bond yields below 6% that could stimulate" bank stocks.

Bank stocks continue to present bargains, analysts said.

"Loan volume, margins, and top-line growth all look good," Mr. Finucane said. "Plus, the multiples are inexpensive."

Though analysts welcomed Tuesday's activity, they noted that the buying was far from a fevered pace.

"Investors are hesitant to jump in with both feet" until the Fed meets on Aug. 24, said Scott Edgar, research director with Sife Trust Fund of Walnut Creek, Calif.

"Now you just cross your fingers and hope it will last," Mr. Edgar said.

Analysts said banks were likely to continue their volatile ride, with large gains one day and drops in the days following.

"We've gotten so many mixed messages from data in the last couple of weeks," said Sean Ryan, a banking analyst with Bear, Stearns & Co. "We'll likely see banks make exaggerated moves based on what numbers come out."

"This time we saw good numbers so it was off to the races again," Mr. Ryan said. "This kind of volatility will continue unless the numbers show a consistent pattern."

Other analysts said outside of some big event, bank stocks may again languish in between economic reports.

"We need a catalyst to get things going," said Mr. Finucane of Hancock Funds. "Perhaps a headline merger and people would again start paying for bank stocks again."

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