Bank stocks, lifted by positive economic news, posted modest gains for a second straight day Wednesday.
The KBW Bank Index closed up 1.5%, after gaining 0.7% Tuesday.
Gainers included several large-cap banking companies. Wachovia Corp. rose 4%, Bank of America Corp. and SunTrust Banks Inc. both rose 2.2%; Citigroup Inc. rose 1.6%, and JPMorgan Chase & Co. rose 1.5%.
Fannie Mae gained 15.3% and Freddie Mac 19.7%. Late Tuesday, Standard & Poor's Ratings Service affirmed the top ratings on the two mortgage companies' senior unsecured debt.
Strength in financials helped the broader markets. The Dow Jones industrial average and the Standard & Poor's 500 each rose 0.8%.
On the economic front, the Commerce Department said Wednesday that orders for durable goods in July rose 1.3% from the previous month, reaching a seasonally adjusted $219 billion. Economists generally had expected demand to be flat, according to Thomson Reuters.
"It was certainly a very nice, positive number, and it says to us that business spending is strong," Tim Quinlan, an economic analyst at Wachovia, said in an interview Wednesday.
Analysts also said investors appeared to welcome a presentation Wednesday at Georgia State University by Atlanta Federal Reserve Bank President Dennis Lockhart, who said inflation is "worrisome" now but is likely to moderate over the next year.
Other notable gainers were Popular Inc., 5.9%; Fifth Third Bancorp, 5.8%; Provident Bankshares Corp. in Baltimore, 8.8%; and Pacific Capital Bancorp in Santa Barbara, Calif., 5%.
Wednesday's upbeat economic news followed reports earlier in the week that indicated home prices are falling at slower rates this summer than in the spring, an early indication of that housing markets are stabilizing.
Investors have responded favorably. The KBW Bank Index is up 1.8% for the past week.
But traders noted that activity has been light this week — the last week of August is a popular one for vacations — and they said a true test of investors' read on recent economic data will come after Labor Day, when most of Wall Street will be back at work.
Trading "has been anemic," Tim Curran, a bank stock trader at Regions Financial Corp.'s Morgan Keegan & Co. Inc., said in an interview Wednesday. "It's always slow at this time of year, but I can't remember it ever being slower than this week."