NEW YORK - Bank stocks shot higher Friday after an agreement on a financial regulation bill reassured investors that new rules won't devastate financial companies' profits.
Banks outdistanced the rest of the market after congressional negotiators agreed on a bill that increases the regulation of financial companies, but that doesn't include some of the harshest provisions that the government originally proposed. The legislation imposes new rules on the complex investments known as derivatives, but the rules aren't as strict as investors feared.
"They come out of this big-time winners," Bob Froehlich, senior managing director at Hartford Financial Services, said of financial companies.
Banks were the market's big performers on a day when the Dow Jones Industrial Average fell almost 9 points and the other major indexes had only slim gains.
The stock market's overall gains were limited by the government's final report on the gross domestic product for the first quarter. The Commerce Department said the GDP, the broadest measure of the economy's health, rose at a 2.7 percent annual pace rather than the 3 percent previously estimated. The report follows a string of weaker-than-expected economic numbers in the past week and raised investors concerns about the recovery.
For the week, the Dow was down 2.9 percent, while the Standard & Poor's 500 was down 3.6 percent and the Nasdaq index was off 3.7 percent. The market fell sharply Wednesday and Thursday in response to the disappointing economic reports.