Beaten down for much of the year, financial stocks have returned to favor in recent weeks as their cheaper multiples and prospects for consolidation after the financial modernization bill is signed have sparked buying interest despite a rising interest rate environment.

One of the clearest signs of renewed bullishness has come from Merrill Lynch & Co., which is in the process of pitching a fund aimed specifically at investing in the sector. The Merrill Lynch Global Financial Services Fund, targeted to retail investors, could attract as much as $1 billion, the firm says.

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