Despite Treasury Secretary Robert Rubin's resignation, most major bank stocks rallied from early losses and climbed on Wednesday.

Since Mr. Rubin's resignation has long been expected, the market rebounded quickly.

"It couldn't be good news no matter when it came, since Rubin is so widely respected," said Raphael Soifer of Brown Brothers, Harriman & Co. "But the market seems to have come back."

Citigroup rose 1.98%, to $73.9375; Chase Manhattan Corp. 2.89%, to $82.3125; J.P. Morgan & Co. 2.82%, to $139.125; and KeyCorp 7.29%, to $34.9375.

But some stocks did not join in the rally. Bank of America Corp. fell 0.27%, to $68.8125; First Union Corp. 1.37%, to $54.0625; National City Corp. of Cleveland 2.07%, to $71.125; and State Street Corp. 1.41%, to $83.

State Street may have been feeling the effects of a Wall Street analyst lowering his expectations.

On Monday Judah S. Kraushaar of Merrill Lynch & Co. shaved his 1999 earnings estimate for the company to $2.95 per share, from $3, and his 2000 estimate to $3.35, from $3.45.

The revision comes on the heels of State Street's announcement last week of an agreement to sell its commercial and retail banking business for $350 million to Citizens Financial Group.

State Street, which focuses on serving institutional customers, has long ranked among the most highly regarded bank stocks. It is a longtime leader in generating fee-based lines of business.

But Wednesday's drop was the latest tremor for shares of the Boston company, whose stock hit a 52-week high of $95.25 on April 27.

State Street's shares were downgraded on April 30 by analyst Ruchi Madan of PaineWebber Inc. to "attractive" from "buy." She also expressed concern that her revenue forecast may have been too optimistic.

Nevertheless, most analysts remain bullish on the stock.

The sale to Citizens would essentially allow State Street to focus on its core business as a processor for institutional investors, said analyst George A. Bicher of BT Alex. Brown. State Street's growth rate, return on equity, and operating margins "compare favorably to the overall market," he said, and the company is well positioned in terms of scale, product, and breadth.

Mr. Bicher forecasts earnings of $3.01 per share this year and $3.50 in 2000.

The Dow Jones industrial average fell 0.23%, to 11,000.37, while the Standard & Poor's bank stock index rose 0.49%, to 714.67.

Banks stocks have also been buoyed by merger and acquisition speculation in the wake of the planned acquisition of Mercantile Bancorp of St. Louis by Milwaukee-based Firstar Corp.

"In the last week banks have had a pretty good run" said Diana P. Yates, an analyst with A.G. Edwards. "Some of the M&A in the past couple of weeks have breathed new life into the group."

"Bank stocks have good potential," said Sung Won Sohn, senior vice president and chief economist of Wells Fargo & Co. in Minneapolis.

They are "trading well below the average market price-to-earnings ratio," he said, and the prospect is for further industry consolidation that will "create more efficiencies and higher earnings power."

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