Bank stocks and the broader markets rallied Wednesday on encouraging economic news, analyst upgrades and a decision by the Federal Reserve to leave a key interest rate unchanged.

The KBW Bank Index rose 5.02%, the Dow Jones industrial average 2.11%, and the Standard & Poor's 500 index 2.16%.

Early in the day the Commerce Department said that the U.S. gross domestic product in the first quarter fell 6.1% from the fourth quarter, a more severe decline than the 4.9% drop that economists on average had expected. However, the report also said that consumer spending rebounded and inventories fell, suggesting that businesses might start stocking up again.

Investors were also encouraged after Fox-Pitt analyst David Trone raised his rating on the U.S. banking sector from "underweight" to "market weight."

Later in the afternoon, the Federal Open Market Committee said that it would keep its target range for the federal funds rate between zero and 0.25%. The committee also said the economy has continued to contract, though the pace of contraction appears to have slowed.

Frank Barkocy, the director of research at Mendon Capital Advisors, said that the bank stocks performed solidly across the board Wednesday on all of the encouraging news.

"There seems to be a growing feeling that the economic deterioration is slowing and that we're getting closer to stabilization," he said.

Gainers included Bank of America Corp., up 6.5%; JPMorgan Chase & Co., 5.2%; Wells Fargo & Co., 2.5%; U.S. Bancorp, 6.3%, and Citigroup Inc., 23 cents, to $3.12 a share.

Among the regionals, Zions Bancorp. rose 6.4%, Comerica Inc. 8%, M&T Bank Corp. 6.2% and Huntington Bancshares Inc., 16 cents a share, to $2.94.

B of A delayed releasing the results of shareholder balloting to strip chief executive Kenneth Lewis of the chairman title, saying the outcome was too close to call. However, shareholders at the Charlotte, N.C., company's annual meeting Wednesday reelected all 18 members of the board of directors, said a source close to the matter.

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