Updated from 2:08 p.m. EDT

The financial sector catapulted even higher than the rest of the market Monday on confirmation of

Sallie Mae's

(SLM) - Get Report

buyout and a load of solid earnings reports, most notably from financial-services behemoth

Citigroup

(C) - Get Report

.

Citi

posted

first-quarter earnings (excluding a special charge) of $5.88 billion, or $1.18 a share -- up 7 cents from last year, and 9 cents higher than analyst estimates from Thomson Financial. Shares were recently higher by $1.33, or 2.6%, to $52.93.

Wachovia

(WB) - Get Report

likewise

squashed first-quarter estimates

, pocketing $1.24 a share on a non-GAAP basis vs. the Street's $1.16 per-share targets. Shares tacked on 2% to $55.06.

The

NYSE

Financial Sector and the KBW Bank indices, each of which harbors both Citigroup and Wachovia, respectively shot up 1.7% to 9738.74 and 1.9% to 96.46.

As for Sallie Mae's stratospheric rise, the nation's biggest student lender

agreed to sell itself

for some $25 billion to a group lead by J.C. Flowers. The deal pans out at $60 a share and should close late this year. Shares soared $8.59, or 18.4%, to $55.35.

Feeling the residual effects of the deal were

Nelnet

(NNI) - Get Report

, another big student lender, as well as

CIT

(CIT) - Get Report

, which owns an education-lending unit. Nelnet bounced 14.5% to $28; CIT shares gained 5% to $55.62.

But in a rare downside move today, Sallie Mae rival

First Marblehead

(FMD)

plummeted

on the buyout news, given that two of its biggest customers --

JPMorgan

(JPM) - Get Report

and

Bank of America

(BAC) - Get Report

-- are among those taking Sallie Mae stakes. FMD shares recently lost $9.83, or 21.1%, to $34.60. JPMorgan was up 1.8% to $49.97, and BofA added 1.6% to $51.23.

Fremont General

( FMT), on the other hand, led the sector's percentage gainers today. The firm surged 26% to $8.88 after

agreeing to sell

around $2.9 billion of its subprime loans to an unnamed entity, as well as entering talks to sell "most of its residential real estate business and assets."

The

Nasdaq Stock Market

I:IXIC

lifted slightly at $31.46 after

announcing

first-quarter income will probably meet the Street's 24-cent per-share projections, stripping out dime-a-share expenses related to its spurned bid for the

London Stock Exchange

.

Elsewhere,

Fannie Mae

( FNM) jumped 5.5% to $56.92 after Banc of America upped the mortgage lender to buy from neutral, and an analyst with JPMorgan said the ongoing subprime-lending travails won't impact

Moody's

(MCO) - Get Report

as much as the Street anticipates. The credit-rating agency was upped to outperform; shares recently gained 4.7%, or $2.92, at $65.72.