|
Bank stocks see sunlight
|
 |
February 16, 1999: 4:33 p.m. ET
Share prices rise on a surging bond market and renewed investor optimism
|
NEW YORK (CNNfn) - The bruised and battered banking sector showed signs of life on Tuesday, thanks to a surging bond market and renewed optimism by bargain hunters who think the worst may be over, analysts said.
After enduring months of dismal earnings and plunging stock prices on the heels of economic turmoil in Asia and Latin America, bank stocks on Tuesday rose sharply, with Chase Manhattan Bank up nearly 5 percent.
"Bank stocks are breathing a sigh of relief," said Michael Ancell, banking analyst with Edward Jones in St. Louis, Mo.
The bond market soared Tuesday, fueled by a strong dollar and falling Japanese government bond yields, while lower U.S. interest rates triggered more banking activity.
Plus, investors seem less concerned that the Federal Reserve will increase interest rates to slow the economy down, Ancell said. Concern over a possible rate hike triggered a sell-off in late January and early February, he said.
While the broader market ended the day with only small gains, Chase Manhattan (CMB) climbed 3-5/8, or 4.89 percent, to 77-11/16, while Bank America (BAC) jumped 1-3/4 to 64-5/8. First Union (FTU) ended the day up 9/16 at 51-5/16.
Dow components J.P. Morgan (JPM) gained 1-7/8 to 110-1/4, while American Express (AXP) added 2-1/4 to 102-3/16 and Citigroup (C) jumped 1-9/16 to 53-7/16.
The S&P Banks Composite Index is down 5.09 percent for the year as of Tuesday, while the S&P 500 has risen a scant 0.07 percent in the same time. But many analysts think the worst may be over -- although investors should brace themselves for more volatility in 1999.
"I'd like to think that this is a bottoming out and people are starting to see the value that a lot of these banking stocks offer," said Tom Finucane, assistant portfolio manager at John Hancock Regional Bank Fund in Boston. "I'd like to think there's some bottoming out and strength, but in general the market is nervous."
The fund, one of three focusing on the financial sector run by John Hancock, has $6 billion in assets.
"It's a good time to go bargain hunting," Finucane said.
Despite problems in Asia and Brazil, many big banks showed improvement in fourth-quarter earnings, Finucane said. And the smaller banks, which got dragged down even though they didn't have global exposure, performed even better.
Finucane is still nervous about the biggest banking names, such as Citicorp and Chase Manhattan, because of their global exposure. He recommends mid-sized stocks, such as Comerica (CMA) and FirstMerit Corp. (FMER).
(The Regional Bank Fund owns titans such as First Union and BankAmerica, but Finucane said it's because those banks acquired stocks that the fund held in its portfolio).
"You don't worry about Thailand and Brazil with FirstMerit," Finucane said.
Some big banking stock funds, such as Vanguard's Windsor Fund, had lightened their bank holdings back in 1997 on the belief that those stocks were rising too high and due for a break, said Russ Kinnel, head of equity fund research at Morningstar, a Chicago fund-tracker.
"Because bank stocks are more of a value stock, managers won't care that they're going up for a week or two," Kinnel said. "It's more important for them that after taking a breather, valuations look more attractive."
-- by staff writer Martine Costello
|
|
|
|
|
 |
|
