Despite a morning sell-off on a dismal employment report, bank stocks posted strong gains Friday.

The KBW Bank Index rose 6.72%, as investors continued to pick up oversold stocks. For the week, the index fell 1.15%; it had dropped 17.4% Monday.

"Bank stocks were up because they got so badly pummeled at the beginning of the week," said Theodore Kovaleff, an analyst at Granta Capital Group LLC in New York. "Bank stocks were the sector that was the most oversold, so these stocks tend to fare better than everyone else" in subsequent sessions.

Stocks fell sharply Friday morning after the Labor Department reported that the economy lost 533,000 jobs last month — the most in 34 years — after losing 403,000 in September and 320,000 in October. The unemployment rate rose 20 basis points from a month earlier, to a 15-year high of 6.7%.

The broader markets also bounced back Friday from a morning drop. The Dow Jones industrial average closed up 3.09% but fell 2.19% for the week. The Standard & Poor's 500 rose 3.65% Friday but fell 2.25% for the week.

Shareholders at Bank of America Corp. and Merrill Lynch & Co. Inc. approved B of A's deal to buy the New York investment banking firm. B of A's stock rose 6.3%, and Merrill's rose 9.5%.

Fifth Third Bancorp rose 8.5%. The Cincinnati company said Friday that John Bultema, the president and chief executive for its central Florida region, will become the president of its western Michigan region next month. Karen Lovaglio Dee, a senior vice president and head of retail banking, will succeed Mr. Bultema in central Florida.

South Financial Group Inc. rose 4.2%. The Greenville, S.C., company said Friday that it had completed the issuance and sale of $347 million of preferred stock to the Treasury Department as part of the Capital Purchase Program. The infusion raised South Financial's Tier 1 risk-based capital ratio by 3 percentage points, to 14.18%, and its total risk-based capital ratio by the same amount, to 15.68%.

Citigroup Inc. rose 4.2%, JPMorgan Chase & Co. rose 7.3%, Bank of New York Mellon Corp. rose 5.5%, PNC Financial Services Group Inc. climbed 9.7%, M&T Bank Corp. rose 9.2%, and Comerica Inc. rose 7%.

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