Bank stocks and the broader markets were buoyed Wednesday by better-than-expected economic news, and anticipated changes in mark-to-market accounting rules.
The KBW Bank Index rose 3.62%, the Dow Jones industrial average 2.01% and the Standard & Poor's 500 1.66%.
The National Association of Realtors said its February index of home sales contracts rose 2.1% from January, to 82.1. Existing home sales rose 5.1%, and sales of new homes rose 4.7%. The Commerce Department said February construction activity fell 0.9% from January; economists on average expected a 1.5% decline.
Also Wednesday, the Institute for Supply Management said its March manufacturing index rose 1.4% from February, to 36.3. Economists on average had expected the index to rise to 36.
Frank Barkocy, the director of research at Mendon Capital Advisors Corp., said the positive news countered an early morning report from the Labor Department that had initially sent stocks down. The department said unemployment rates declined in February in all of the metropolitan areas it tracks.
"We're now getting some positive reinforcement from a broader array of individuals — economists, analysts, talking heads and bankers — suggesting that we may be at or near the bottom, and that the economy is slowly showing signs of recovery," he said. "Hopefully, that continues to be the case."
Investors expect the Financial Accounting Standards Board's scheduled vote today to ease mark-to-market rules, Barkocy said.
Investors were also encouraged that four banks were able to pay back money they received from the Capital Purchase Program without any "additional strings attached."
Federal Deposit Insurance Corp. Chairman Sheila Bair said Wednesday that any new rules intended to limit risk-taking at big banks should include raising their capital requirements. She also said the "too big to fail" model governing regulators' actions had to end.
JPMorgan Chase & Co. rose 5.9%, Bank of America Corp. 3.4%, Wells Fargo & Co. 1.7%, U.S. Bancorp rose 2.1%, Bank of New York Mellon Corp. 0.5%, State Street Corp. fell 0.8% and Citigroup Inc. rose 15 cents to $2.68.
Among the regionals, PNC Financial Services Group Inc. 4.1%, SunTrust Banks Inc. 2.4%, M&T Bank Corp. 6.4%, Marshall & Ilsley Corp. 6.4%, City National Corp. 1.9%, Bank of Hawaii Corp. 1.1% and Zions Bancorp. 5.6%.
