Bank stocks held on to gains throughout the session Friday, finishing a dire week on a strong note.
The sector gained as the broader market seesawed violently to end in negative territory.
"The point swings that occurred today" in the Dow Jones industrial average "were some of the largest point swings in market history," said Joseph C. Morrissey, managing director of bank and thrift stocks at Boenning & Scattergood Inc. of West Conshohocken, Pa.
The KBW Bank Index rose 8.47%, aided by a late-day rally after a week of punishment by investors spooked by the deepening credit crisis. The index fell 11.8% Thursday and 21.69% for the week.
The Dow average fell 1.49% for the day and 18.15% for the week. After falling nearly 700 points in early trading Friday to below 8,000, it rallied to positive territory with significant gains late in the day, then dropped to 8,451.19, its lowest closing level since May 2003.
The Standard & Poor's 500 also rallied late in the afternoon but closed off 1.18% for the day and 18.19% for the week.
Mr. Morrissey and others said investors returned to bank stocks Friday.
"There's the thought that there could be a large capital injection" from government and private sources, including foreign ones, "and that could be driving the market higher," he said.
A number of bank stocks rebounded after being hurt Thursday by the lifting of the Securities and Exchange Commission's short-sale ban, Mr. Morrissey said.
Sean Ryan, an analyst at Sterne, Agee & Leach Inc., said the bottom for many bank stocks could be near.
"There are a lot of stocks that have lost 50% of their value since Oct. 1, so there are plenty of banks fairly cheap right now," Mr. Ryan said.
Friday's gainers included Regions Financial Corp., which jumped 20.3%; Sovereign Bancorp Inc., which rose 16.9%; Huntington Bancshares Inc., which rose 8.8%; KeyCorp, which rose 5.8%; and Fifth Third Bancorp, which rose 6.9%.
Bank of America Corp. gained 6.3%, and State Street Corp. rose 5.4%.
Late Thursday, Citigroup Inc. ended its opposition to Wells Fargo & Co.'s deal to buy Wachovia Corp without government assistance. However, Citi said it would continue to "seek compensatory and punitive damages for bad-faith breach of contract and tortious interference" from both Wells and Wachovia for striking their deal Oct. 3 — four days after Citi said it would buy Wachovia's banking operations with government assistance.
On Friday, Judge Lewis Kaplan of the U.S. District Court for the Southern District of New York said a hearing on the matter may be held Monday, according to Reuters.
Wachovia rose 43.1%, Wells rose 3.9%, and Citi rose 9.1%.
National City Corp. fell 7% a day after rising 2.2%, one of the few gains among bank stocks Thursday.
Mr. Ryan said investors could have concluded that there was "little" to reports that Nat City was talking with possible buyers, including PNC Financial Services Group Inc. and Bank of Nova Scotia. "But typically things like this get wrapped up over a weekend, so a deal could definitely still happen."
A Nat City spokeswoman said Thursday that she would not discuss market speculation.
PNC rose 13.6% on Friday.
Capital One Financial Corp. rose 6.4%. On Friday the McLean, Va., company's auto finance arm said it would suspend financing for New York and New Jersey auto dealers starting Nov. 1.