Enough investors went bargain hunting Thursday to help bank stocks buck new data that showed the economy contracting and word of a big round of job cuts at American Express Co.
On a day when trading moved in a narrow range between gains and losses, the KBW Bank Index finished up 0.7%, chipping away at the 3.6% it lost a day earlier.
The broader markets followed a similar pattern. The Dow Jones industrial average gained 2.1%, and the Standard & Poor's 500 index finished up 2.6%.
"There were a few good gains, but otherwise we were essentially trading sideways," Tim Curran, a bank-stock trader at Regions Financial Corp.'s Morgan Keegan & Co. Inc., said in an interview Thursday.
American Express, which said it plans to cut 7,000 jobs, or about 10% of its work force, to save $1.8 billion in 2009, gained 3.4%.
And BB&T Corp. in Winston Salem, N.C., which announced key promotions to coincide with the Jan. 1 retirement of chief executive John Allison, gained 1.1%. The company said Chris Henson, its chief financial officer, will be promoted to chief operating officer, succeeding Kelly King. In August, Mr. King was named to succeed Mr. Allison.
Other notable gainers included JPMorgan Chase & Co. in New York, 5.4%, and Sterling Financial Corp. in Spokane, 4.1%.
The Commerce Department reported Thursday that gross domestic product fell at a 0.3% annual rate in the third quarter, dragged down by weak consumer spending. The GDP figure, the government's first estimate, would be the weakest since a 1.4% decline in the third quarter of 2001, if it is not later revised upward.
But economists surveyed by Dow Jones Newswire had, on average, forecast a 0.5% decline in GDP, noting that employment has dropped for nine consecutive months and home prices continue to fall in many states.
Mr. Curran said the markets had already priced in a modest decline in GDP, which explains why the Commerce Department report did not affect trading Thursday. "It was really a nonevent," he said.
There were, however, notable decliners Thursday: Fifth Third Bancorp in Cincinnati, 5.7%; Downey Financial Corp. in Newport Beach, Calif., 5.4%; and Hampton Roads Bankshares Inc. in Norfolk, Va., 5%.
Most analysts expect the volatility that has marked trading much of the past month to return in the days ahead as the markets determine the impact of the Federal Reserve's latest interest rate cut and of the Treasury Department's move to invest in banks.
"This market, time and again, has proven it can turn on a dime," Brad Milsaps, an analyst at Sandler O'Neill & Partners LP, said in an interview Thursday.