Stocks open higher as report says job losses slow

Investors felt more confident putting their money into the financial sector on the eve of today’s formal release of results of the government’s “stress tests” of the country’s big banks.

Financial stocks led the market higher Wednesday on indications that balance sheets at major lenders might not be as frayed as some had feared.

Analysts expect that about half of the 19 institutions tested, including Citigroup, Bank of America and Wells Fargo, will be asked to boost their capital. At least some of those banks, however, expect to accomplish that by converting one type of stock into another -- in other words, without raising cash.

“To me, this rally has been more a recognition that maybe the end of the world is not at hand,” said Philip S. Dow, managing director of equity strategy at RBC Wealth Management.

The Dow Jones industrial average climbed 101.63 points, or 1.2%, to 8,512.28. The blue chips closed above the 8,500 mark for the first time since Jan. 9, leaving the Dow down only 3% for 2009.

The Standard & Poor’s 500 index jumped 15.73 points, or 1.7%, to 919.53, pushing the gauge further into positive territory for the year after a rally Monday erased the last of its 2009 losses.

The Nasdaq composite index rose 4.98 points, or 0.3%, to 1,759.10.

Some analysts said the jump in financial stocks may have been exaggerated by investors covering so-called short positions. Traders who sell a stock short -- borrowing shares and then selling them in the hope they will be able to profit by buying the stock at a lower price later -- can rush into the market to limit their losses if the stock’s price rises.

Shares of some banks expected to have to boost capital rose more sharply Wednesday than some other bank stocks. Citigroup and Bank of America each surged 17%, while Wells Fargo rose 16%.

Among banks not expected to have to raise money, American Express rose 2.2%, JPMorgan Chase gained 6.9% and Bank of New York Mellon added 11%.