Bank stocks rallied Wednesday on positive economic news and favorable comments from the Federal Reserve's chairman.
Investors essentially shrugged off cautionary remarks by Federal Reserve Chairman Alan Greenspan, who suggested that the Fed was not likely to cut interest rates.
Instead, Wall Street watchers said bank stocks rose on the Fed leader's favorable comments regarding Asia during his semiannual Humphrey-Hawkins testimony.
Mr. Greenspan said the U.S. economy is capable of withstanding the tremors that might arise from further deterioration in Asia.
At the same time, however, he cautioned that Asia's most important economy, Japan, is still mired in difficulties.
The Standard & Poor's bank index climbed 1.60%, outstripping the Dow Jones industrial average, which rose 1.05%. The Nasdaq Bank index rose 0.68%; the S&P 500, 1.20%.
Some of the biggest gainers of the day were BankAmerica Corp., which gained $2.6875, to $77.50; Bankers Trust New York Corp., $4.0625, to $117.75; and NationsBank Corp., $2.50, to $68.875.
Treasury bond prices rose on news that home resales rose less than expected in January, according to the National Association of Realtors.
Home resales increased 0.7% in January, to an annual rate of 4.4 million, economists said. In December home resales had fallen 0.5%.
Bank analyst Lawrence J. Cohn of Ryan, Beck & Co., Livingston, N.J., said bank stocks also got a boost because "there is no bad news" to prompt investors to sell.
He added that the continuing theme of virtually no inflation and continuing economic growth is also causing bank stocks to climb.
"This is an awfully kind environment to run a bank" in, Mr. Cohn said.
In other news, Friedman Billings Ramsey & Co. downgraded its recommendation on the shares of J.P. Morgan & Co. to "hold" from "buy."
Bank analyst Carla D'Arista of Friedman cited the stock's recent run caused by merger speculation as the reason for the downgrading.
"Since the announcement of the disappointing fourth-quarter results, the shares have rebounded by as much as 18%, reflecting speculation that recent revenue pressures have positioned J.P. Morgan as a merger candidate," wrote Ms. D'Arista in a recent report.
The analyst also noted that an internal memo warning of upcoming layoffs and strategic options was exaggerated by the media.
The management memo said that Morgan would prefer to maintain its independence, said Ms. D'Arista.
"J.P. Morgan would ultimately be most interested in a combination involving a large insurance entity - a universal-banking strategy that is currently prohibited by U.S. regulators," she said. J.P. Morgan's shares rose $2.125, to $118.125.
WestAmerica Corp.'s shares surged more than 3.5% on news that its 3-for- 1 stock split took effect Wednesday. Shares of the $2.5 billion-asset banking company rose $3.125, to $102.375, on heavy volume.
