Financial Winners & Losers: Lehman

Financial stocks rose Wednesday, on signals that the economy may be slowly improving and indications that banks and other firms are setting aside enough capital to cope with housing-related losses.

The NYSE Financial Sector Index added almost 75 points, or 1.2%, as the Dow Jones Industrial Average gained more than 50 points, or 0.9%.

A better-than-expected increase in durable-goods orders last month indicated that businesses and consumers are still purchasing large manufactured items, from aircraft and machinery to cars and refrigerators. And while a federal agency said that thrifts lost $5.4 billion in the second quarter, they also set aside a record amount to cover losses from bad loans.

John Reich, director of the Office of Thrift Supervision, said nearly all of those banks, or 98%, have sufficient capital and that managers have been "responding appropriately to the challenges they face."

Still, Federal Deposit Insurance Corp. Chairwoman Sheila Bair told the Wall Street Journal on Tuesday that the agency may have to tap into Treasury funds to cover payouts to customers of failed banks. Since the FDIC has rescued only nine banks this year, Bair's words indicate that more of those on the "troubled" list may be headed for insolvency. The FDIC may also raise the rates that banks pay into its own reimbursement fund, further hurting the cash-strapped banking sector.

Despite recent concerns, Fannie Mae(FNM Quote) and Freddie Mac(FRE Quote) sailed higher for the fourth straight session, as investors became more confident that the government-supported mortgage buyers will have enough capital to weather the housing storm.