believe that the sector has bottomed out.

The Standard & Poor's Bank index, which hit an 11-month low Monday, rose 0.62%, to 575.48. The Dow Jones industrial average fell 0.27%, to 10,275.5.

Some money-centers and superregionals roared back to life at the end of the day. U.S. Bancorp rose $1.25, or 4.35%, to $30 a share; State Street Corp. $1.8125, or 2.92%, to $63.8125; and J.P. Morgan & Co. $2.1875, or 1.94%, to $115.

Most bank stocks have been in a free fall since April as investors reacted to rising interest rates and volatility in the market attributed to the year-2000 computer bug.

But the ratcheting down in bank stock prices has produced compelling valuations, said Adam J. Lewis, a senior vice president and bank stock trader at Keefe, Bruyette & Woods Inc.

"There has been a lot of pessimism toward financial stocks," said Mr. Lewis. "But I think we are nearing a bottom. Bank stocks have gotten so beaten down. Some of the multiples are at seven or eight times 2000 earnings. That's ridiculous "

Another trader, however, said that most of Tuesday's gains were the result of short sellers covering their positions. Short selling is a bet that the market will fall. Short sellers borrow shares, sell them, then wait for the market to decline. When it does fall, they buy the shares back, cover their bets, and make a profit.

"Frankly, I don't see the financial stocks stabilizing, and I have been a bull forever," said the trader, who requested anonymity. "Every time I looked for these financials to hold, they did not." The short sellers "have been right on this sector."

But Stephen Biggar, a bank analyst at S&P Group, said that it is a good sign for bank stocks if short sellers are covering their bets.

"If people are covering their shorts, they feel that the worst is over," said Mr. Biggar. "The fact that bank stocks are holding up pretty well in a down market also suggests that most of the weakness may have left the group."

The analyst also said the valuations are too low to ignore. "Bank stocks have lost more now than they did during last year's international crisis when banks were hit with earnings losses and writeoffs."

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