The S&P 500 rose on Wednesday to its highest level since the collapse of Lehman Brothers, led by bank stocks that have leapfrogged other sectors in December.
The banks -- epicenter of the credit crisis two years ago -- led indexes higher as a December run helped keep the market's year-end rally afloat. The KBW Bank Index <.BKX> rose 1.9 percent, led by regional institutions.
The financial sector is unique in that it has spent two consecutive years in the performance basement, said Lawrence Creatura, portfolio manager at Federated Clover Investment Advisors in Rochester, New York.
Today financials look a little bit more investable than they did 18 or 24 months ago because the price is right and some risk has been extracted.
The S&P 500 has risen for five sessions in a row but gains have been modest and on light volume. The benchmark's relative strength index points to a pullback in the near term, but for now investors don't seem worried.
The CBOE Volatility Index <.VIX>, known as Wall Street's fear gauge, fell 6.3 percent to 15.45, its lowest closing level since July 2007.
Bank of America Corp
Regional banks outpaced their larger counterparts after recent merger activity in the sector boosted hopes for more M&A to come. Hancock Holding Co
The KBW regional bank index <.KRX> was up 3.7 percent and is now up 19.4 percent for the month. Whitney Holding surged 28.8 percent to $14. United Bankshares Inc
The Dow Jones industrial average <.DJI> added 26.33 points, or 0.23 percent, to 11,559.49. The Standard & Poor's 500 Index <.SPX> gained 4.24 points, or 0.34 percent, to 1,258.84. The Nasdaq Composite Index <.IXIC> edged up 3.87 points, or 0.15 percent, at 2,671.48.
The S&P 500 climbed above 1,255.08 where the index closed just days after Lehman filed for bankruptcy in September 2008. For the year, the index is up 12.9 percent, including a 6.6 percent December run.
Today it looks like an economic dawn with some scattered clouds on the horizon, but there's no denying things are better today than they were then, said Creatura. He noted the light holiday season volume makes the milestone somewhat less robust.
Energy shares rose as crude oil futures settled 0.7 percent higher at $90.48 a barrel. Chevron Corp
About 6.14 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, well below last year's estimated daily average of 9.65 billion.
Advancing stocks outnumbered declining ones on the NYSE by 1,838 to 1,163, while on the Nasdaq, advancers beat decliners 1,391 to 1,254.
(Reporting by Leah Schnurr; Editing by Kenneth Barry)