The Federal Open Market Committee's decision to leave interest rates alone and developments on Capitol Hill concerning student lending nudged financial services stocks higher Wednesday.
The American Banker index of 225 bank stocks and the thrift index each rose 0.59%.
The Standard & Poor's 500 added 0.36% and the Dow Jones industrial average rose 0.4%.
The Open Market Committee said it decided to leave interest rates unchanged at 5.25% because "economic growth slowed in the first part of this year and the adjustment in the housing sector is ongoing. Nevertheless, the economy seems likely to expand at a moderate pace over coming quarters."
Scott Anderson, a senior economist at Wells Fargo & Co., wrote in an e-mail to clients that the committee's statement "was a bit of a yawn, perhaps intentionally so" considering Wall Street misinterpreted its March statement to signal a shift toward a neutral monetary policy.
"On inflation, the Fed remains concerned, which will disappoint some on Wall Street who have been lobbying for a rate cut," Mr. Anderson wrote.
Meanwhile, with just three dissensions, the House of Representatives approved the Student Loan Sunshine Act. The bill would require lenders to report contracts with universities to the Department of Education, tell borrowers about different options, and avoid implying that a school endorses their products - all in an effort to end the cozy relationships between colleges and student lending companies.
The market's reaction toward specialty lenders was mixed. CIT Group Inc. of New York, which owns Student Loan Xpress, rose 1.3%. First Marblehead Corp. of Boston fell 0.5%. Nelnet Inc. of Lincoln, Neb., rose 0.9%.
After the markets closed Tuesday, Provident Bankshares Corp. of Baltimore said it had agreed to sell six central and western Virginia branches to Union Bankshares Corp. of Bowling Green, Va.
Collyn Bement Gilbert, an analyst with Stifel, Nicolaus & Co. Inc., wrote in a research note issued Wednesday that the move makes sense for Provident because the "total deposits of these six branches was $46 million, implying an average deposit per branch of a mere $7.6 million" and were outside its core markets of Baltimore, Washington, and Richmond, Va. The transaction will not include any loans, Union Bankshares said.
Shares of Provident fell 0.5%. Union Bankshares gained 1.1%.
Other gainers included Corus Bankshares Inc. of Chicago, which rose 7.4% partly on speculation that the losing bidder for ABN Amro Holding NV's LaSalle Bank Corp. will look for another Windy City company to buy. Riverview Bancorp Inc. of Vancouver, Wash., rose 5.3%, and Centennial Bank Holdings Inc. of Denver added 3.6%.
Decliners included Doral Financial Corp. of San Juan, Puerto Rico, 2.9%, and Center Bancorp Inc. of Union, N.J., 1.7%.
