Bank Stocks Back in Black After Brutal Drop

NEW YORK (TheStreet) -- Most bank stocks on Tuesday recovered some of the heavily losses over the previous two sessions.

The Dow Jones Industrial Average was up 0.5%, while the S&P 500 added 0.8% and the NASDAQ Composite rose 0.9%, with investors' hunting for bargains switching the market's direction after the deep losses over concerns of slowing manufacturing growth in the U.S. and China, tacked onto fears of capital flight from emerging market economies.

Also putting a positive spin on Tuesday's market action was a report from the Congressional Budget Office projecting another significant drop in the federal budget deficit.

The CBO said it expected the deficit to shrink to $514 billion for 2014, or 3% of the gross domestic product, down from about $680 billion in 2012, and $1.12 trillion during 2012. The CBO said the 3% GDP level is "close to the average percentage of GDP seen during the past 40 years," and that it expects the deficit to shrink further to $478 billion, or 2.6% of GDP in 2015.

"After that, however, deficits are projected to start rising-both in dollar terms and relative to the size of the economy-because revenues are expected to grow at roughly the same pace as GDP whereas spending is expected to grow more rapidly than GDP," the CBO said, emphasizing the continuing growth of the U.S. national debt. The CBO also emphasized what most observers of Congress already know, which is that "spending is boosted by the aging of the population, the expansion of federal subsidies for health insurance, rising health care costs per beneficiary, and mounting interest costs on federal debt.

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