After a week of losses, bank stocks staged a comeback Monday, boosted primarily by upbeat third-quarter earnings reports.

Compared with a 3.6% decline on Friday, the American Banker index of the 225 largest financial institutions rose 1.8%, and the American Banker index of 50 of the largest banks rose 2.4%. Both outpaced the Dow Jones industrial average, which rose 1%, and the S& P 500, up 0.5%.

The nation's largest banking companies were the biggest gainers: J.P. Morgan & Co. was up $7.3125, or 6.9%, to $113; Citigroup Inc. $1.6875, or 4%, to $43.8125; and Bank of America Corp. $1.375, or 2.9%, to $49.5625.

Charlotte, N.C.-based Bank of America beat analysts' earnings estimates and was upgraded to "strong buy" from "buy" by First Union Capital markets.

Observers attributed the banking group's rise in part to "bottom fishers," who were combing the sector for bargains.

Monday's gains, however, after a 10% decline in bank stocks last week, did little to cheer market experts, who said they doubted whether the higher prices would be sustainable.

"This rally is likely to be short-lived, even though bank stocks really got whacked on Friday," said Christopher Bamman, a bank analyst at Advest Group. "It's the same picture, but a different frame. Bank stocks will go up and then sell off again."

Others agree that another downdraft could be in store for bank stocks -- particularly, economists said, if the Consumer Price Index that is to be released today gives any hint of inflation. The market could also react "badly" to the nation's international trade figures, which the government will issue Wednesday, said Scott J. Brown, an economist at Raymond James & Associates in St. Petersburg, Fla. "It's going to be a rough road ahead for bank stocks," he said.

"There definitely are clouds for the fourth quarter," said James Ellman, a portfolio manager at Merrill Lynch Asset Management.

Analysts have been cutting fourth-quarter earnings estimates, said Mr. Ellman. Investors continue to be concerned about the millennium bug, which could cause liquidity problems in the capital markets, said Mr. Ellman. He added that he believes most of the volatility in bank stocks will disappear in the first quarter.

"Bank senior management has spent an inordinate amount time focusing on Y2K," said Mr. Ellman. "Once that is over, their focus will return to maximizing shareholder value."

Shares of Sovereign Bancorp fell 2.2%, to $8.3125, on Monday, making its deal to buy 278 branches from Fleet Boston Corp. more difficult.

When the Wyomissing, Pa., thrift company announced the deal in September, it presented a plan for raising the $1.4 billion it needed half with equity and half with debt. It assumed an equity price of $10 per share. With the company's stock price now 16.9% below that, Sovereign would have to issue more shares, further diluting its current shareholders. Or it would have to rely more heavily on debt.

But that could be increasingly difficult, too. On Monday, Standard & Poor's put the $25 billion-asset company on "credit watch negative," a step down from "negative outlook." On Friday, Moody's Investors Service put the credit ratings of the thrift under review for a possible downgrading.

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