Bank of America rally fuels financials’ charge

Bank of America shares rallied more than 5% on Tuesday, helping financial stocks to close out the day as the best performing sector on the S&P 500.

U.S. bank stocks also got a lift from strong European bank shares which propelled stock markets in London, Paris and Frankfurt higher. Read European stock market review

Still, the outlook for U.S. financial firms’ quarterly earnings is less than stellar with analysts at Barclays Capital forecasting earnings per share for median banks to fall 3% sequentially in the fourth quarter.

Marketwatch’s David Weidner has a list… a list of Wall Street voices to avoid in 2012.

“The earnings of the two investment banks [Goldman Sachs and Morgan Stanley] are not going to be great,” said Richard Bove, a bank analyst at Rochdale Securities, in emailed comments. “The earnings of the universal banks should be better than that of the investment banks and the regional banks should have strong numbers,” he said.

American International Group AIG +4.46% and Morgan Stanley MS +4.26% both surged more than 4% while Goldman Sachs GS +3.84% advanced 3.8% and Citibank C +3.16% gained 3.2%.

J.P. Morgan Chase & Co. JPM +2.12% , rose 2.1%. The bank, which is scheduled to report this Friday, is expected to hand in a fourth-quarter profit of 92 cents a share, down 18% from the same period in 2010, according to a Thomson Reuters survey.

Citi and Wells Fargo WFC +0.38% are slated to report next Tuesday and Bank of America will announce quarterly results on Jan. 19.

Genworth Financial GNW +7.39% shares jumped 7.4% following an announcement on Monday that it will sell its tax and accounting financial advisor unit to Cetera Financial Group for an undisclosed sum.

The Financial Select Sector SPDR ETF XLF +1.82% added 1.8% and the SPDR S&P Bank ETF KBE +1.28% climbed 1.3%.

All four financial components in the Dow Jones Industrial Average DJIA +0.56% — Bank of America Corp., J.P. Morgan Chase & Co., American Express Co. AXP +0.58% , and Travelers Cos. TRV +0.69% — finished the session higher.

Source: MarketWatch