NEW YORK (MarketWatch) -- Financial stocks advanced to their highest levels in more than a month Thursday after a report showed existing-home sales rose more than expected in June, raising hope that the real-estate sector may be on the rebound.

The sector's benchmark exchange-traded fund, Financial Select Sector SPDR Fund (XLF) , was up 2.6% to 12.46, its highest point since June 12.

Insurance giants made notable gains with shares of Prudential Financial Inc. (PRU) , Hartford Financial Services Group Inc. (HIG) , and Principal Financial Group Inc. (PFG) climbing 5.6%, 14%, and 6.8%, respectively.

On the economic front, resales of U.S. single-family homes and condos rose 3.6% in June to a seasonally adjusted annual rate of 4.89 million, the highest level since October 2008, the National Association of Realtors reported Thursday.

Re-sales have risen for three straight months for the first time in more than five years.

"The solid increase in existing home sales in June provides more substantive evidence that the market is stabilizing if not slowly recovering after the three-year long slump, and offers more tentative evidence that house prices are bottoming," wrote economist Sal Guatieri in a note to clients.

In all, the increase was higher than expected. Economists surveyed by MarketWatch expected sales to rise to 4.85 million. Sales are down 0.2% on a year-on-year basis.

Also on the upside Thursday, shares of Fifth Third Bancorp (FITB) jumped nearly 17% after the company said it earned $882 million in the second quarter after posting a $202 million loss in the year-ago period.

Though the company said that its net charge-offs as a percentage of loans almost doubled in the second quarter, driven by a surge in charge-offs for commercial loans, investors focused their attention to the swing in profits to the upside along with language from management that losses will abate.


"The key focus is on credit quality, which appears to have stabilized during the quarter with non-accrual loans increasing just 7% from the first-quarter of 2009, representing one of the lowest growth rates we have seen this quarter," wrote analysts at Stifel, Nicolaus & Co. in a note to investors Thursday.

Still, total net charge-offs in the quarter rose to 3.08% of outstanding loans. The rate for commercial loans was 2.81%, up from 1.41% a year ago. Consumer charge-offs as a percentage of total loans rose to 3.48% from 2.04%.

In dollar amounts, the bank charged off $626 million of loans in the quarter, compared to $344 million a year ago.

On a bearish tone, shares of Moody's Corp. (MCO) fell 4.4% after Warren Buffett's Berkshire Hathaway Inc. (BRK.A) said it sold approximately 8 million shares of the ratings agency over the past three trading days.

In a regulatory filing late Wednesday, National Indemnity Co., an insurer owed by Berkshire (BRK.A) , said it sold shares of Moody's at average daily prices ranging from $26.6425 to $26.9188, which reduced the firm's stake to about 40 million shares, or just under 17% from 20%.

Soon after Buffett's filing late Wednesday, analysts at William Blair & Co. "reluctantly" downgraded shares of Moody's to market perform from outperform.

"Our downgrade is based not on any change to our fundamental thesis or valuation but what this latest fact ... may do to investor psychology," they wrote in a note to investors Thursday.