Updated from 2:52 p.m. EDT

Financial stocks rose Friday as American Express ( AXP) led the group higher and information on the government's stress tests failed to deter buyers.

The Financial Selects Sector SPDR, which tracks the financial stocks in the S&P 500, rose 2.2%, and the KBW Bank Index advanced 2.9%.

American Express shares surged 20.7% to $25.30, leading the Dow after better-than-expected earnings and despite a ratings downgrade from Moody's.

CIT Group ( CIT), on the other hand, sank 11.5% to $2.46 a day after its earnings. The stock was downgraded by Barclays, Keefe Bruyette & Woods and Credit Suisse.

In a 21-page report, the Federal Reserve shared the process used for the Supervisory Capital Assessment Program, or stress test, that banks are undergoing.

Meant to determine the capital adequacy of the 19 biggest financial institutions, the report reiterated earlier comments from Treasury Secretary Tim Geithner that most U.S. banks already have capital levels "well in excess of the amounts required to be well capitalized."

However, some banks may need to raise new funds as reserves have been hit by the economic and market downturn. Specifics weren't disclosed this time, although the banks were reportedly briefed on their results and more information is expected to be available early in May.

Some banks, including JPMorgan Chase ( JPM) and Goldman Sachs ( GS), have voiced their desire to return federal money, but whether the government will accept it may rely in part on the results of the stress tests.

JPMorgan rose 0.5%, while Goldman lost 1.2% on Friday. Bank of America ( BAC) gained 2.7%, and Citigroup ( C) slipped 0.3%.

Morgan Stanley ( MS) shares were unchanged for the day at $21.96, after a report that it's considering changes to its biggest proprietary-trading desk, including possibly spinning it out into a hedge fund or opening up the unit to outside investors, according to The Wall Street Journal.

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