Even if interest rates stabilize, investors are placing bets on investment banks rather than U.S. commercial banks, in part because the investment houses are in a better position to build business in Europe.
Capital markets in Europe are "hot, and they are over there," said Adam J. Lewis, a senior vice president at Keefe, Bruyette & Woods Inc., referring to Lehman Brothers, Merrill Lynch, and Morgan Stanley Dean Witter, among other investment banks, and to J.P. Morgan & Co., a commercial bank with an investment banking strategy and a presence in Europe. 
Meredith A. Whittney of First Union Securities said the U.S. market "peaked three years ago. Europe is where the U.S. was five years ago, ready for explosive growth."
Germany in particular, she said, will provide good opportunities for U.S. investment banks because "German banks are not doing the job." Brokers with high shares in Europe will do best on Wall Street, Ms. Whittney predicted.
As Amy Butte, an analyst at Bear, Stearns & Co., lifted her rating on Lehman to "buy" from "attractive," shares of investment companies surged anew. Lehman gained $5.75, or 5.1%, to $118.5; Morgan Stanley rose $1.25, or 1.37%, to $92.1875; and J.P. Morgan gained 18.75 cents, or 1%, to $19.
The American Banker index of the top 50 banks gained 0.15%, while its index of 225 banks rose 0.41%, continuing a pattern that has been in place since spring in which investment banks have outpaced commercial banks by a wide margin.
Being positioned in Europe is not the only reason for the surge in investment banking stocks. Analysts said that they are coming off a low earlier in the year, when a dramatic dip in the Nasdaq index scared brokerage investors.
"The market is going to be quieter during the summer," said James P. Hanbury, an analyst at Wasserstein Perella Securities, "and in a normal market, investment banks always perform better."
Investment banks also got a lift from merger speculation after UBS Warburg announced a $10.8 billion deal last month to buy PaineWebber.
Ms. Whittney predicts the rally will fizzle soon, and she is keeping a "hold" rating on investment banks.
She called J.P. Morgan "the single best broker. They have a dominant market share [in the United States], high market underwriting, and the highest share of U.S. underwriting in Europe."
Mr. Lewis said the PaineWebber deal "was a wakeup call for those who are trading cheaply, like J.P. Morgan" and A. G. Edwards, whose shares fell 14.45 cents, or 0.82%, to $51.6367 Wednesday.
Regional and commercial banks have failed to gain investors' attention in the last couple of weeks. "There is a difference between regional banks with difficulties in case interest rates are rising, and the major diversified banks," Mr. Lewis said. "The supercapitalized banks are still doing well," even if they do not rally.
Ms. Whittney was pessimistic about the commercial banks as well. "Commercial banks are done for this year," she said.
