LONDON, April 29 (Reuters) - Hedge funds returned into

markets last week to buy bank stocks having sold out of

positions for eight straight weeks, a Goldman Sachs ( GS ) note shows.

Financial firms including U.S. banks became the second-most

net bought stock behind real estate this year, said the note

released on Friday and seen by Reuters on Tuesday.

That move came as markets digested what the largest U.S.

banks had to say in their first-quarter earnings reports.

Trading desks at JPMorgan Chase ( JPM ) and Morgan Stanley ( MS )

brought in record revenue as markets boomed early in the

year, while Wells Fargo ( WFC ) earned more fees from clients

quarterly presentations showed.

Hedge fund positions in financials as an overall stock

sector reached a two-year high, said Goldman Sachs ( GS ).

Hedge funds have taken mostly long positions on these

financials stocks for five of the last seven weeks, said the

note added. A long bet expects a stock price to rise.

This kind of buying outpaced the smaller number of hedge

fund trades that were the result of hedge funds buying stock to

exit short bets. A trader borrows stock in order to short it, or

bet that it will decline in value, after which, the trader buys

it back again.

While capital markets firms and banks took up most hedge

fund buying last week, financial services firms that facilitate

trading were the most bought kind of financial stock this year

so far, said Goldman Sachs ( GS ).

Global stock picking hedge fund performance rose over 2%

between April 18 and 24, and systematic traders posted a 0.44%

performance increase during the same time period, said the note.