Bank stocks rallied for the second successive day Wednesday, suggesting they may be righting themselves after a bad stumble out of the starting gate this year.
"Concerns about Asia are still alive and well," said industry analyst Michael L. Mayo of Credit Suisse First Boston. "However, a growing number of investors are beginning to believe that these concerns are already reflected in stock prices."
The Standard & Poor's bank index rose 0.53%; the Dow Jones industrial average, 1.28%. The Nasdaq bank index was unchanged, and the S&P 500 rose 0.87%.
Some of the biggest gainers of the day were BankAmerica Corp., which rose $1.625, to $70; Fifth Third Bancorp, 37.5 cents, to $78.1875; and First Tennessee Corp., $1, to $60.0625.
"It was clear for the first month this year that some investors were looking to sell bank stocks" and ignoring positive factors, said Mr. Mayo. "But there is clearly a limit to this type of selling."
The analyst said he expects "smoother sailing for banks" in the days ahead because "momentum investors who were in the stocks previously have probably fled as a result of the turmoil in Southeast Asia."
Investors inclined to sell because of a flattening yield curve also have probably left the group by now.
"The yield curve has actually steepened in the last two weeks," said Mr. Mayo. "This proves that investing in bank stocks based on the direction of interest rates is a tough way to make money."
Raphael Soifer, an industry analyst at Brown Brothers, Harriman & Co., agreed that "market fears are gradually coming out of bank stocks."
Banks "are trading more on psychology at this point than analysis," he said. "The money-centers have sold off more than their risk to Asia could justify."
Nevertheless, he emphasized, "we still have a long way to go."
That seemed to be confirmed Wednesday as trading in money-center shares lagged behind that in the stocks of other banking companies. J.P. Morgan & Co. shares tumbled 93.75 cents, to $101.4375, and Citicorp's stock fell 25 cents, to $116.75. Bankers Trust New York Corp.'s shares declined $1.25, to $104.125.
Still, the overall market tone for bank stocks was decidedly more upbeat than it has been.
"Investors are looking to put their Asian fears behind them," said a trader who declined to be identified. He added that the positive tone of President Clinton's State of the Union Address "helped bank stocks rise."
In other news, McDonald & Co. bank analyst Fred A. Cummings upgraded his rating on the stock of National City Corp., Cleveland, to "buy" from "hold" because he expects the company's shares to rise considerably in the second half of the year.
Mr. Cummings said he expects company earnings to grow substantially because of its pending acquisition of First of America Corp., Kalamazoo, Mich.