An upbeat earnings forecast from Wells Fargo & Co. sent bank stocks soaring on Thursday.

The KBW Bank Index closed up 20% after Wells announced in the morning that its first-quarter net income would exceed analysts' expectations.

The news pushed up banking stocks, which have rallied in recent weeks. In the broader market, the Dow Jones Industrial Average closed up 3.15% and the Standard & Poor's 500 index 3.8%.

"We're coming back up again," said Peter Cardillo, the chief market economist at Avalon Partners Inc. "The last nails have been nailed into the bear coffin."

In another sign of renewed investor confidence, the Chicago Board Option Exchange Volatility Index fell 5%, to a six-month low. The index is a closely watched gauge of investor anxiety.

Wells Fargo said it expects to report first-quarter earnings of $3 billion, or 55 cents a share, on revenue of about $20 billion. The average of analysts' estimates in a survey by Thomson Reuters was that the San Francisco company would post earnings of 23 cents a share.

Wells' shares closed up 31.7%, at $19.61.

David George, an analyst at Robert W. Baird & Co., said Wells' strong preliminary results bode well for other big mortgage providers, such as JPMorgan Chase & Co. and Bank of America Corp.

"Other mortgage players should have a very strong first quarter as well," he wrote in a research note Thursday.

Wells is the latest large banking company to offer an improved financial outlook. JPMorgan, Bank of America and Citigroup last month said they had been profitable in the first two months of the year.

These banks' shares also gained Thursday, despite soft sales figures from Wal-Mart Stores Inc. and other retailers that weighed on the market.

JPMorgan Chase rose 19.39%, Bank of America 35.27%, U.S. Bancorp 22.84% and Citigroup 34 cents, to $3.04 a share.

Among regional banking companies, SunTrust Banks Inc. closed up 30.56%, Marshall & Ilsley Corp 28% and City National Corp. 15.51%.

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