Bank stocks rallied strongly on Tuesday, along with the bond market.

Despite a late selloff that dragged the Dow Jones Industrial average to 3,7435.17, up only 2.76, many banks scored big gains.

Bankers Trust New York Corp. was up $2.50 to to $69; Norwest Corp. gained $1. to $26.125; First Fidelity Bancorp, jumped $1 to $46.25; and Mellon Bank Corp. rose $1.125 to $57.875.

Analyst Judah Kraushaar of Merrill Lynch said investors may be less optimistic about earnings growth at industrials and more hopeful about bank stocks, now that the economy is expected to slow down.

He also said fears over derivatives trading losses may have subsided.

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