NEW YORK ( TheStreet) -- Bank stocks rose on Tuesday as the Federal Reserve met to discuss whether the economy had sufficiently improved to justify a gradual tapering of the central bank's massive monetary stimulus program.
The Federal Reserve will conclude its two-day meeting on Wednesday and Chairman Ben Bernanke will hold his quarterly press conference. The central bank is expected to say that it will gradually taper its bond purchases but will not hike short-term interest rates anytime soon.
Major stock averages rose Tuesday amid signs that inflation hasn't spiked as a result of the bank's stimulus measures, and data showing that the country's housing market remains months, if not years, away from a full recovery. That means the central bank will not take its foot completely off the pedal.
The KBW Bank Index, an index of 24 banks, rose 0.8%. People's United Financial (PBCT - Get Report) led the index higher, rising 2.7% after being upgraded to overweight by JPMorgan Chase analyst Steven Alexopoulos. The analyst said the current price offered the best entry point in two years and sees 15% upside to the 2014 consensus earnings forecast.M&T Bank (MTB - Get Report) shares rose 1.1% after it reached an agreement with the Federal Reserve over a money laundering probe that had held up its merger with Hudson City Bancorp (HCBK - Get Report). The bank will hire an independent consultant to review transactions of "high-risk customer accounts" in the last six months of 2012. It will also have to submit an anti-money laundering compliance program to the Fed outlining specific actions the bank is taking. Shares of Hudson City rose 2.4% on the news. Citigroup (C - Get Report) rose the most among the big four money-center banks, gaining 1.3%. The bank, along with JPMorgan Chase (JPM), PNC Financial (PNC) and Huntington Bancshares (HBAN) would