Tel Aviv stocks reversed mild morning gains to end Tuesday below the flatline, after a dull session characterized by low turnovers - except in the banks. Yet stocks proved resilient yet again to the violence wracking the nation, not to mention more reports of skulduggery in the banking establishment.

Traders attributed the volatile nature of the session to the expiry of options on the Maof-25 index, due on Thursday. Major options players typically try to sway the indices in their favor as the last trading week approaches a close.

Good results from Koor Industries (NYSE:KOR) and other companies had lifted Tel Aviv stocks at opening. Investors were largely unmoved by the 1% rate rise the Bank of Israel announced yesterday, although some analysts had expected it to be even steeper.

But the Maof-25 index ended down 0.1% while the Tel Aviv-100 index lost 0.2%. Tech stocks on the other hand proved resilient to the blah, and finished with a steady gain of 1.7%. Total equity turnover was moderate at NIS 260 million.

The market was not surprised by yesterday's 1% rate rise, explained DBM Investment House manager Rami Dror. Bank of Israel governor David Klein also stated that he does not expect the shekel's stability to be undermined by the rate hike, given the widening interest spread between the dollar and shekel.

Throwing in his two cents, Ofek investment house's chief economist, Yossi Mualem, said he doesn't see the government deficit dropping below 5% of GDP in 2002. Hence, he says, a sovereign credit downgrade is inevitable. He added that interest on central bank sources is likely to rise to 6.5% by year-end, which would mean that the governor would gradually raise rates by 0.9% by then.

The banks were the story of the day, with little embezzlements coming to light at Mizrahi and Leumi. The thefts in question paled compared with the NIS 250 million grand theft that killed Trade Bank, but still ¿

Bank Leumi, which published heartening financial statements compared with expectations, nonetheless sagged by 2.2% on turnover of NIS 17 million.

UBS Warburg today decided against changing its rating of Israel's second-biggest bank: the analysts left it at Hold, and also left its price target intact at NIS 7.4. Goldman Sachs concurred, leaving Leumi at Market Perform. The UBS team drily noted that Leumi's lower-than-expected first-quarter provision for doubtful debt only related to two quarters, not three.

Bank Hapoalim lost 0.4% on turnover of NIS 20.4 million.

Bank Mizrahi gained 2.8% on huge turnover of NIS 31.7 million, most unusual for that modest bank. Much of that is because shares held by bank workers, purchased in 1998, were released from lockup today. Altogether 6.3 million shares were released, worth NIS 70 million, comprising 3% of the bank's shareholders equity. The turnover and the share's direction indicate that somebody is building up a stake in the bank.

Koor Industries (NYSE:KOR) published its report before the bell this morning. It noted losing $105 million for the quarter, largely due to an $82 million currency conversion writeoff by defunct subsidiary Tadiran Communications. Yesterday Koor slipped 1.5% on turnover of NIS 5 million, on top of the 2.7% it lost the day before. Today it gained 1.7% on turnover approaching NIS 7 million.

The Bezeq phone company started and ended the session on a gain of 0.8%, on high turnover of NIS 27 million. The telecommunications monopoly will be revealing its first-quarter results tonight. It is expected to announce profits of NIS 20 million for the first three months of the year.

Drug giant Teva Pharmaceuticals (Nasdaq:TEVA) climbed by another 1.2% after a volume of NIS 41.3 million had changed hands - a fifth of the total turnover.

Israel Chemicals rose 1.8% on turnover of NIS 4.3 million, after today reporting its first quarter results. The company reported a 10%increase in net profit to NIS 94 million.

The Israel Corporation, parent company of Israel Chemicals, will also be publishing its first-quarter financial statements today after the bell. It is expected to report losing NIS 50 million, mainly due to its holdings in Tower Semiconductor (Nasdaq:TSEM), Oil Refineries and the Zim shipping company. In any case the share rose by 1% on turnover of almost NIS 6 million.