Bank stocks continued their rally heading into Thanksgiving despite some negative economic data and a bearish report from a leading bank analyst.

The KBW Bank Index rose 3.92% Wednesday and was up 25.7% for the week. The Dow Jones industrial index gained 2.91% on the day (up 8.5% for the week), and the Standard & Poor's 500 index rose 3.53% (up 11%).

Tim Curran, a bank stocks trader at Regions Financial Corp.'s Morgan Keegan & Co. Inc., said that few catalysts supported the sector's rise; he attributed its gains to investors' looking to get into bank stocks while prices remained relatively low. "Things have been on a nice uptick, and a lot of people didn't want to miss the huge upside," he said.

"People who don't typically participate in the sector were just going along" with the rebound, which could continue for a few more trading sessions, Mr. Curran said in an interview.

He quickly cautioned, however, "Nothing has fundamentally changed in the last three days, and we're hardly out of the woods yet."

The latter sentiment was reinforced by Meredith Whitney of Oppenheimer & Co., who warned in a note to clients that many banking companies would have to use capital from the Treasury Department's Capital Purchase Program to offset what she estimated as $44 billion of writedowns and loan-loss provisions in the fourth quarter. As a result, she wrote, it is unlikely that banks will use the funds to spur meaningful economic growth.

The government issued more data giving evidence that the U.S. economy is in recession. The Labor Department reported that seasonally adjusted requests for unemployment benefits, though down 2.6% from a week earlier, remained high at 529,000.

The Commerce Department reported that consumer spending fell 1% in October, compared to September, and that orders for durable goods fell 6.2% compared to the month earlier. The agency also said that new-home sales fell 5.3% in October compared to a month earlier.

The Federal Deposit Insurance Corp. said that it plans to create a "modified bidder qualification process" that would give nonbanks an opportunity to bid on banks that are in danger of collapsing.

Citigroup Inc. shares were among the day's biggest gainers, up 16% after Reuters reported that Grupo Financiero Inbursa, an investment firm controlled by Carlos Slim, a Mexican billionaire, had bought 26 million shares of the New York company's stock for $150 million between Nov. 19 and 25.

Bank of America Corp. shares rose 4.3%. The Charlotte company got Federal Reserve Board approval to buy the New York investment house Merrill Lynch & Co. The companies expect to complete their deal this quarter.

Merrill's shares rose 7.5%.

Other large banking companies had healthy gains, including JPMorgan Chase & Co., up 2.9%; Wells Fargo & Co., 6.3%; and U.S. Bancorp, 4.9%.

Wintrust Financial Corp.'s shares fell 1.7%. The Lake Forest, Ill., company said that it had received preliminary approval to sell $250 million of preferred stock to the Treasury under the Capital Purchase Program. It said the capital could be used "to grow lending operations and to position Wintrust for additional market opportunities."

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