Thursday's Financial Winners & Losers

Financial stocks shot higher than the rest of the market Thursday on the power of positive analyst research as well as a red-hot recovery at Sallie Mae (SLM Quote).

As relayed shortly before Wednesday's close in a Sallie press release, the J.C. Flowers-led investor group that agreed to buy the education lender in April said it didn't expect to close the $25 billion deal in light of a congressional bill -- signed into law this morning by George Bush -- that will cut education-lending subsidies. Sallie estimated that "core earnings" will recede by 1.8% to 2.1% annually over the next five years as a result of the legislation.

Sallie vowed to "pursue all remedies available to it to the fullest extent permitted by law," saying that the group -- which also includes Bank of America (BAC Quote) and JPMorgan Chase (JPM Quote) -- "has no contractual basis to repudiate its obligations under the merger agreement." But the group said in a statement that they informed Sallie they're "open to discussing a revision of the transaction that reflects this new [legislative and economic] environment."

Sallie shares vaulted 8.3% to $48.76 in heavier-than-usual action, more than recovering from yesterday's furiously traded drop. That helped lift the NYSE Financial Sector Index, which gained 0.8% at 9,277.81 to sharply outperform the broad indices. Fellow members BofA and J.P. Morgan were both off marginally in recent trading.