A 2% gain for Citigroup Inc. helped lift the Dow Jones industrial average 1.1% Monday.
Citigroup and Home Depot Inc., which gained 3%, were the Dow's biggest gainers.
The American Banker index of 225 banking stocks rose 3.41% and the Standard & Poor's 500 rose 1.01%.
Credit Suisse First Boston analyst Susan Roth Katzke reiterated her "outperform" rating on Citigroup. In a report issued after she met with Citi chief executive Charles O. Prince, she wrote that the company has "above-average earnings visibility" and is "among our top picks in the brokerage and multinational bank group."
Morgan Stanley closed up 1.2% after a jury ruled in favor of investor Ronald Perelman on Monday afternoon in a lawsuit accusing Morgan Stanley of fraud related to the collapse of Sunbeam Corp. Morgan Stanley said it will appeal the verdict.
Shares of New Century Financial rose 4.7% after Sandler O'Neill & Partners LP issued a report listing the Irvine, Calif., nonprime mortgage finance company as a likely candidate to join the Russell 1000 Index when the Russell 3000 index is rebalanced this year. The preliminary list of additions and deletions is due the first week of June.
Shares of Mellon Financial Corp. rose 1.4%. Morgan Stanley analyst Betsy Graseck wrote in a report issued Monday morning that the Pittsburgh company "is improving its competitive position."
Ms. Graseck tacked on a penny to her 2005 and 2006 earnings estimate, bringing both to $2.09. Hers was one of several research notes on Mellon that came out after the company's investor day Thursday.
The online brokers Ameritrade Holding Corp., E-Trade Financial Inc., and Charles Schwab Corp. were active after the release of April trading-activity reports showed sequential declines. Ameritrade and E-Trade both fell 0.7% and Schwab rose 1.9%.
In a research note published Monday, Richard Herr of Keefe, Bruyette & Woods analyst lowered his third-quarter earnings estimate for Ameritrade by a penny, to 17 cents, and his fourth-quarter estimate by 2 cents, to 20 cents. He said the change was "based on sharper than expected slowing of trading activity."
