NEW YORK ( TheStreet) -- Bank stocks rallied on Wednesday as positive economic data from U.S, Asia and Europe buoyed sentiment.

Large-cap bank stocks rallied, with Bank of America ( BAC - Get Report) gaining 3.2% to close at $7.36. Citigroup ( C - Get Report) and Wells Fargo ( WFC - Get Report) gained 2.86% and 2.75% respectively , while the action in JPMorgan Chase ( JPM - Get Report) was more muted, with the stock finishing higher by 1%

President Obama on Wednesday unveiled details of a broad refinancing program directed at helping "responsible" homeowners, including those who owe more than their homes are currently worth, save an average $3,000 a year by refinancing their mortgages at attractive interest rates.

The $5 billion to $10 billion proposal is expected to be funded by a proposed "Financial Crisis Responsibility Fee" that would be imposed on the largest financial institutions, based on their size and riskiness. The proposal, first announced by Obama in his State of the Union Address, will require Congressional approval.

Bank of America, Wells Fargo and JPMorgan Chase are the three biggest mortgage originators in the country and could gain from a refinancing wave. Bank of America's share of mortgage originations fell to 5.6% in the fourth quarter from 24.7% in 2007 quarter while Wells Fargo's share doubled to 30% over the same period, according to FBR Capital analyst Paul Miller.

But any gains from refinancing could be offset by the fee imposed on the largest banks to fund the plan.

Some analysts believe the proposal is dead on arrival because it will fail to win congressional approval in an election year. Others believe it could be a political victory for Obama's campaign as it counters criticism that he has done little to revive the housing market.

Citigroup on Wednesday received an upgrade from Wells Fargo Securities analyst Matt Burnell. The analyst expects increased capital returns, positive operating leverage and a continued unwinding of Citi Holdings to drive outperformance of the stock, even if capital markets revenues remain weak. The target price on the stock was raised to $35 to $37.

The analyst also upgraded First Horizon ( FHN - Get Report)to outperform, citing increased capital returns. FHN's robust capital base should allow substantially higher share buybacks in 2012/2013, materially improving capital returns. Aggressive cost reductions (aided by a shrinking non-strategic portfolio) should generate materially stronger PPNR expansion than peers. Still, FHN trades at a 40% P/TBV discount to peers," the analyst argued, raising the price target on the stock to $9.50 to $10.50.

Morgan Stanley ( MS - Get Report) gained nearly 4% on Wednesday amid heightened excitement surrounding the Facebook IPO. The social networking giant filed its S-1 on Wednesday after market hours and the investment bank was named the lead underwriter. Rival Goldman Sachs ( GS) and JPMorgan are also underwriting the offer. Goldman saw shares rise nearly 1.8%

Former Credit Suisse ( CS) employees face criminal and civil charges for allegedly mis-stating the value of billions of dollars of mortgage-backed securities to boost profits and bonuses.

A former trader, Salmaan Siddiqui, and his supervisor, David Higgs, each pleaded guilty to a criminal conspiracy charge at separate hearings in Manhattan federal court. The investment bank itself does not face any charges. Shares of Credit Suisse finished higher by nearly 4%.

Deutsche Boerse said Wednesday the European Commission will block its planned $10 billion merger with NYSE Euronext ( NYX). "Based on its definition of the market for derivatives trading, (the commission) considers the merger to be inadmissible under competition law," Deutsche Boerse said in a statement. NYSE Euronext shares erased 0.5% to $26.43.

--Written by Shanthi Bharatwaj in New York

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