Friday's Financial Winners & Losers

Fed comments boost the sector.
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Financial stocks leapt to finish the week substantially higher on Friday, once again propelled by comments out of the

Federal Reserve

.

The sector had taken a tumble yesterday following a healthful Wednesday rise, which had been inspired by Fed Vice Chairman Donald Kohn's remarks

suggesting that another rate cut is forthcoming.

Today, however, Fed head honcho Ben Bernanke helped to vault financial stocks stratospherically after saying that a number of unfavorable conditions "seem likely to create some headwinds for the consumer in the months ahead." That generally reinforced the rate-cut hopes that Kohn had already sparked two days earlier.

The

NYSE

Financial Sector Index jumped around 182 points, or 2.1%, to 8,681.91. The KBW Bank Index climbed some 3 points, or 3.1%, to 97.17.

Also contributing to the jubilant mood was talk that government officials are nearing a plan to

temporarily freeze the "teaser" interest rates of some subprime-mortgage loans, which were otherwise planned to reset at much higher fixed rates following an introductory period. This is in the hope of avoiding a feared ensuing landslide of foreclosures.

According to

The Wall Street Journal

, regulators are meeting with executives from

Citigroup

(C) - Get Report

, which added 3.1%;

Countrywide

(CFC)

, which surged 16.3%;

Washington Mutual

(WM) - Get Report

, up 8.3%; and

Wells Fargo

(WFC) - Get Report

, up 6.2%; among others. The

Journal

cited people familiar with the negotiations.

Also rising sharply on this news were the lately languishing mortgage investors

Freddie Mac

(FRE)

and

Fannie Mae

(FNM)

, each of which soared nearly 19%, in addition to financial guarantors and mortgage insurers.

Like all other entities exposed to the subprime mess, shares of these firms -- for example,

Ambac

(ABK)

,

MBIA

(MBI) - Get Report

,

MGIC

(MTG) - Get Report

,

Radian

(RDN) - Get Report

, and

PMI

(PMI)

-- have suffered a calamitous few months. Today, shares leapt 8.9% or more.

Elsewhere, the

Journal

reported that new

Merrill Lynch

(MER)

CEO John Thain is preparing to bring in

NYSE Euronext

(NYX)

Finance Chief Nelson Chai. Per the report, talks have already entered an advanced stage, according to people familiar with the matter. Thain was recently hired from the NYSE in order to replace the

ousted Stanley O'Neal.

Merrill shares closed up $2.53, or 4.4%, to $59.94; NYSE hugged the flat line for most of the day before ending fractionally higher at $86.60.

Morgan Stanley

(MS) - Get Report

also booked only lackluster gains after announcing the

retirement of Co-President Zoe Cruz who, to many, had been the heir-apparent to CEO John Mack. The retirement will take effect Dec. 1. Among other simultaneously announced management changes, Walid Chammah in London and James Gorman were appointed co-presidents. Shares traded mostly in positive territory, but flirted with the flat line before ending just 0.7% higher.

Bear Stearns, meanwhile, levied downgrades on

Deutsche Bank

(DB) - Get Report

,

UBS

(UBS) - Get Report

and

Credit Suisse

(CS) - Get Report

, but shares of the banks persisted upward nonetheless. Deutsche rose 1% to $131.75; UBS gained 2.3% to $50.48, and Credit Suisse ticked up 4 cents to $60.32.

Beleaguered online broker

E*Trade

(ETFC) - Get Report

wasn't so lucky. Shares held on for most of the day, but ultimately lost 4.6%, after BMO Capital Markets cut the stock to market perform from outperform. Credit-ratings firm Moody's, moreover, lowered its long-term senior debt rating. That follows yesterday's announcement of a

$2.5 billion cash infusion from Citadel Investments, as well as the resignation of CEO Mitch Caplan. Shares closed down 22 cents to $4.60.

Also among the rare financial decliners was

BankAtlantic Bancorp

(BBX) - Get Report

, which got a downgrade to neutral from buy at Janey Montgomery Scott. Shares of the Florida bank finished 3% lower at $3.85.