Bank stocks by Friday were trading in a narrow range, as investors nervously looked ahead to the Federal Reserve Board's next move on interest rates -- which is expected no later than Tuesday.

"Right now, the banks, along with just about everyone else in the stock market, are being held hostage pending the Fed's decision," said Anthony R. Davis of Dean Witter Reynolds Inc.

Bank stocks, while moving downward, actually outperformed other stocks in the five trading days ended last Thursday.

Several banks posted strong gains Friday, with J.P. Morgan & Co. ahead $1.50 a share, to $63.875, and Bankers Trust New York Corp. up $1.75, to $66.25.

But generally, bank stocks were little changed for the day. Movement in the Dow Jones industrial average appeared constricted, too. The index closed at 3,659.68, up 6.84 points.

Investors' focus is the central bank's policymaking Federal Open Market Committee, which meets Tuesday in Washington to review the nation's business conditions.

Most observers expect a 50-basis-point increase in the federal funds rate -- the charge for overnight borrowings among banks. The Fed has increased the rate three times since February, in each case by 25 basis points. It now stands at 3.75%.

Initially, bank stocks are expected to echo the bond market's assessment of the central bank's action. A selloff has greeted each of the Fed's three previous credit-tightening initiatives.

Positive for Some Banks

But most analysts think banks will weather the Fed's action without long-term difficulty and, in some cases, will be helped significantly if the economy keeps expanding at its recent pace.

Brent B. Erensel of UBS Securities Inc. said that asset-sensitive banks should fare best but that even money-center banks -- traditionally viewed as vulnerable to rising rates -- would not suffer serious negative effects.

Banc One Corp., with its huge franchise based largely on consumer deposits and consumer and small business loans, should fare well. Such assets -- the loans -- tend to reprice much faster than the liabilities -- the deposits, he said.

First Interstate Bancorp is similarly asset-sensitive. The Los Angeles-based company has the added advantage of operating in the fast-growing western states were loan demand is strong.

That means First Interstate should be able to book large amounts of new earning assets in a higher-rate environment.

Meanwhile, at NationsBank Corp., half of its $20 billion bond portfolio matures this year. "Their bonds are maturing just as rates are rising," Mr. Erensel said, "so they are well prepared."

Even the big wholesale-oriented, money-center banks "have altered their asset-liability management posture so that rising rates are no longer as obviously hurtful as in the past," he said.

These large banks, mostly in New York, have traditionally been viewed as more vulnerable than regional banks to rates. They rely less on consumer deposits, and thus, their liabilities are expected to reprice almost as quickly as assets.

That view may no longer be totally accurate, Mr. Erensel said, but their stock prices often reflect it. "It's not as bad as the stock market's reaction tends to suggest," he said.

A 50-basis-point move by the Fed is anticipated by most on Wall Street despite economic data released last week that hinted at a slower growth rate for the economy.

Wholesale prices fell 0.1% in April, according to a government report. Meanwhile, April retail sales fell a surprising 0.8%, with the decline covering all categories.

Frank J. Barkocy, senior analyst at Advest Inc., said he remains unconvinced that a fed funds rate increase beyond 25 basis points can be justified by economic factors. "But there is also the 'let's get it over and done with' view," he said.

"If it takes 50 basis points to allay the concerns in the market that the Fed has done what it needed to do," he said, "then I respect that argument, too."

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