Bank Rally Preserves Tuesday's Gains

Stocks inched higher yesterday, giving Wall Street its first back-to-back positive days in about a month.

The Dow Jones industrial average was up 3.91 points, or 0.1 percent, to close at 6930.40. The Standard & Poor's 500-stock index gained 1.76 points, or 0.2 percent, to 721.36, while the tech-heavy Nasdaq composite index was up 13.36 points, about 1 percent, to 1371.64.

Though yesterday's gains were modest, analysts were encouraged because investors didn't sell massively to lock in profits after Tuesday's sharp gains. The Dow and S&P were up 6 percent Tuesday, wiping away a week of losses. "Market participants appear to be a bit nervous having been burned by so many bear rallies in the past," said Joseph Brusuelas, a director at Moody's Economy.com.

Wall Street had its largest rally this year Tuesday after Citigroup announced that it had made an operating profit during the first two months of the year, spurring hope that parts of the banking sector had survived the worst of the financial crisis. Investors were also cheered by signs that federal regulators might restrain short selling of stocks, a type of trading blamed by some in the financial services industry for dragging down shares.

A key indicator of the rally's sustainability will be the market's reaction to new economic data today, including unemployment claims and retail sales, Brusuelas said. "Given the difficulties in the economy, this may be another one of those temporary multi-week rallies followed by another extended period of weakness in equities," he said.

The banking sector, which led Tuesday's rally, continued to climb yesterday. Citigroup and Bank of America rose 6 percent and 3 percent, respectively. J.P. Morgan Chase gained 5 percent.

Morgan Stanley closed up 8 percent, to $22.51 a share, after Goldman Sachs analysts upgraded its stock. Morgan Stanley's high capital puts it in a good position to outperform its peers and repay government aid it has received, the Goldman report said.

But Goldman downgraded American Express in the same report, citing increasing delinquency rates among some cardholders. It "seems the card industry has a target on its back," the report said. American Express fell 2 percent, to $11.93 a share.

Crude oil prices fell 7 percent, to $42.33 a barrel on the New York Mercantile Exchange after the Department of Energy reported the inventory of crude oil grew unexpectedly.