After a strong performance by bank stocks last week, some on Wall Street are betting the rally won't be derailed by earnings announcements later this week.

In the past five quarters, banks stocks have sold off after earnings were announced.

"As far as I can see, the sellers have run out of excuses," said Miles Siefert, chairman of Gray, Siefert & Co., New York money managers. "I think we are going to get a pretty good run."

"Hopefully, better people own these stocks now," he said. "The momentum players have already sold them twice this year, first on the fears about rising rates and then on fears about failing rates."

Outpacing the Dow

Last week, the American Banker index of bank stocks rose 3% versus a 0.5% increase in the Dow Jones industrial average:

Bank stocks were mixed Friday, while the Dow Jones industrial average gained 25.99 points to 3,581.11.

Among the best performers last week were Wachovia Corp., up 14.7% from Thursday to Thursday, Citicorp, up 5.6%, and State Street Boston Corp., up 4.4%. State Street shares shot up after Donaldson, Lufkin & Jenrette put the stock on its "buy" list.

In late trading Friday, Wachovia was down 62.5 cents to $38.50, Citicorp ahead 25 cents to $38.375, and State Street, enjoying another big gain, was up $1.50 to $37.125

Against the Grain

Indeed, the banks had a strong month in the face of a poor overall market. The American Banker index rose 3.1% during September, in contrast to a 2.6% drop in the Dow industrials and a 1% drop in the Standard & Poor's 500 stock index.

With earnings announcements due to begin next week, there appears to be a sense of optimism generally - though not universally - that a "buy on rumor, sell on news" pattern will not be repeated.

"Nobody knows, but it certainly shouldn't happen," said James J. McDermott Jr., president of Keefe, Bruyette & Woods Inc. "This industry is generating a 15% return on its capital in a low-inflation environment."

"I think the bank stocks will still be firming up" [this week], said Frank J. Barkocy of Advest Inc. "And given the economic environment and the outlook for nonfinancial stocks, maybe they can hold more of their gains this time around."

Sense of Wariness

But some bank stock followers remain wary. They remember rallies earlier this year that were stalked by price corrections despite good earnings reports.

After a barn-burner of a first quarter, banks surrendered 10% in April and May, compounded by brief uneasiness that rates would rise on the heels of increased inflation.

Then, following a recovery, the stocks slipped about 3% on average in July and early August as long-term interest rates went into a sharp decline amid new worries about the economy.

Most Vulnerable Stocks

"I don't think it would be unreasonable to expect a 5% to 10% correction across the group," said Francis X. Suozzo of S.G. Warburg & Co.

A correction in the banks stocks may hurt some shares more than others, analysts said.

Brent B. Erensel of UBS Securities Inc. said some banks could consolidate recent market successes. Citicorp, may hold onto its gains, along with Wells Fargo & Co., First Interstate Bancorp. First Chicago Corp. and Shawmut National Corp., he suggested.

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