Bank stocks continued their resurgence Thursday as the Dow Jones industrial average tore through the 4,000-point level.

Money-center banks and thrifts paved the way, as the prospect of flattening or even declining interest rates fed the rally.

Continued merger speculation also helped fuel financial institution stocks in the wake of Tuesday's announced acquisition of Shawmut National Corp. by Fleet Financial Group.

J.P. Morgan & Co. rose $1.375, to $63; Citicorp, $1, to $44.75 - 5% in the last two days - and Chase Manhattan Corp., 62.5 cents, to $35.125. Also, SunTrust Banks Inc. was up $1.25, to $54.

Federal Reserve Chairman Alan Greenspan indicated in congressional testimony Wednesday and Thursday that the central bank's interest rate increases may be over, leading to a resurgence in financial issues.

"If the consensus develops that this, in fact, is the case, based on historical behavior, the bank group has the potential for an explosive rally, which we would estimate from 15% to 20%," said George Salem, an analyst at Gerard Klauer Mattison & Co.

Accordingly, Mr. Salem upgraded Chase, Chemical Banking Corp., NationsBank Corp., and BankAmerica Corp. to "buy" from "hold." In fact, the analyst said he had upgraded the entire bank group to "buy" from "hold."

Other factors Mr. Salem cited in the sector's favor are low price-to- earnings trading multiples, high dividend yields, stock buyback programs, and the pending reduction in Federal Deposit Insurance Corp. premiums.

Money-centers, which have lagged regional banks in the recent upturn in bank stocks, appeared to be playing catchup Thursday, said Dennis Shea of Morgan Stanley & Co.

And regional banks previously hurt by rate-sensitivity concerns, such as PNC Bank Corp. and Banc One Corp., have fared well the last couple of days, said David MacAllaster, president of MacAllaster Pitfield Mackay, a small Wall Street brokerage that invests in banks.

"People are moving into stocks that had previously suffered because of a rising rate environment," he said.

Potential regional takeover targets, whose vulnerability appears heightened after the surprising Fleet-Shawmut announcement, have all enjoyed a market resurgence since then.

In particular, Virginia banks were up Thursday, as the state's midsize regional players gained takeover visibility.

Signet Banking Corp. was up 50 cents a share, to $36.125, and up 7% since the Fleet-Shawmut announcement. Central Fidelity Banks Inc. increased $2, to $27.25, after an upgrade to "buy" from CS First Boston Corp. Also, Crestar Financial Corp. rose 62.5 cents, to $42.625.

Elsewhere, San Antonio-based Cullen/Frost Bankers Inc. rose 75 cents, to $36.50 a share, and 5% since Tuesday. Milwaukee-based Firstar Corp., which McDonald & Co. upgraded, rose 75 cents, to $29.375. Bank South Corp., Atlanta, rose 75 cents, to $19.875, and has risen 16% since Tuesday.

Bank of Boston Corp., which is suddenly in the shadow of the much larger Fleet, rose 62.5 cents a share, to $30.25, as some investors began to view the company as an acquisition target.

"Interest rates and mergers: The two things combined have attracted a lot of investors," said Elizabeth Summers of Ryan, Beck & Co., summing up the day.

Thrifts, whose stock prices often fluctuate inversely from the direction of interest rates, were also strong performers, Ms. Summers said. In particular, she cited New Jersey-based Collective Bancorp, which was up 75 cents, to $20.685.

The Dow industrials easily closed at a new high, bursting over 4,000 early in the trading day. Overall, the Dow finished up 30.28 points, to close at 4,003.33, besting last week's record close of 3,986.17.

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