Financial stocks started the week on a positive note as Keefe, Bruyette & Woods Inc. unveiled an array of upgrades on bank stocks, though it did downgrade Bank of America to "underperform."

Many of the 12 stocks upgraded - including Bank of New York Corp., FleetBoston Financial Corp., Mellon Financial Corp. and Northern Trust Corp. - are widely favored for their diversified revenues.

Those four went from "buy" from "outperform." And a pair of more new "buys" - Zions Bancorp. and Compass Bancshares - rose two steps, from "market perform."

Fifth Third Corp. and National Commerce Bancorp. were upgraded to "outperform" from "market perform."

Analyst Thomas F. Theurkauf wrote in his research note that the earnings risk of Bank of America got ahead of the stock price. The shares had climbed 15% this year, while Keefe Bruyette's own bank index fell 10.4%, he wrote.

Some investors believe that the recent interest rate cuts will bail Bank of America out of its credit problems by bringing about a speedy economic recovery. Mr. Theurkauf is doubtful.

"Bank of America remains effectively a call on an economic recovery, as the company has reduced its macro reserves over the past few quarters despite higher loan balances and a slower economy," he wrote. "Only time will tell if this posture is warranted," and until then, Mr. Theurkauf recommends the stock only to investors who are optimistic that the economy will get over its current slowdown soon.

Bank of America was one of the few financial stocks to decline Monday, falling 0.53%, to $52.50.

Mr. Theurkauf wrote that the volatile equity markets environment might be benefiting companies with exposure to fixed income and cash management operations, such as Bank of New York. He upgraded the company despite tuning its full-year estimate down 3 cents, to $2.17 per share, while Mellon's earnings expectation was reduced 5 cents, to $2.30.

Bank of New York was up 2.15%, to $46.18, and Mellon 1.8%, to $39.05.

Keefe Bruyette cut its earnings estimate on Citigroup by 10 cents, to $3.05, but kept its "buy" - its strongest rating - on Citi's stock.

FleetBoston's earnings outlook had already been cut, to $3.40, on March 2. Mr. Theurkauf said that no further adjustments are needed at this time, but the stock's lower price justifies an upgrade of the investment rating.

Citi rose 3.15% Monday, to $44.20. FleetBoston rose 1.24%, to $36.60.

Meanwhile, the market got an injection of economic confidence. Leading an array of economic data to come out this week, including the final fourth-quarter gross domestic product numbers, durable goods orders, and consumer confidence, the Commerce Department reported on home sales.

New home sales fell 2.4% from January, and existing home sales 0.4%. Still, the numbers for both suggest sales growth for the full year, "a factor that should keep the sinister forces of recession at bay," said Kenneth Mayland, president of ClearView Economics in Pepper Pike, Ohio.

American Banker's index of 225 banks rose 2.41% on Monday, and its index of the top 50 banks was up 1.81%. The Dow Jones industrial average rose 1.92%, while the Nasdaq composite fell 0.53%.

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