Banking stocks rose slightly on reports the Senate would grudgingly approve Federal Reserve Chairman Ben Bernanke's second term.
The KBW Bank Index rose 0.17%, to 46.60, halting a two-day slide.
Gerald Sparrow, the president and chief investment officer of Sparrow Capital Management Inc., said banking stocks — which have been rocky in recent days amid fears of tighter regulation — could stay volatile until Bernanke is re-elected.
"Then they'll have a chance to shine on their earnings growth," Sparrow said.
He said last year's rally in banking stocks may still have some legs in it, as many big banking companies like JPMorgan Chase & Co. are still undervalued by the market.
JPMorgan Chase and two of the four other largest banking companies recovered slightly from a sharp sell-off last week on the heels of the Obama administration's proposals to tax large banks and limit their trading activity.
JPMorgan Chase rose 0.13%, Bank of America Corp., 0.54%, and Wells Fargo & Co., 1.47%. Citigroup Inc. fell 2 cents to $3.23.
Regional banks were mixed.
Fifth Third Bancorp continued to rise after reporting signs of credit-quality improvement in the fourth quarter, closing up 3.22%. U.S. Bancorp rose 0.57% and PNC Financial Services Group Inc. rose 0.73%.
Losers for the day included BB&T Corp., down 2.06%; KeyCorp, 2.62%; M&T Bank Corp., 0.78%; and Regions Financial Corp., 0.76%.
