Magazine article American Banker

General Market Catches Bank Shares Dozing

Magazine article American Banker

General Market Catches Bank Shares Dozing

Article excerpt

Bank shares slept, while the overall stock market rallied for the second day in a row.

The stock market surged on prospect of another cut in short-term interest rates and optimism on corporate earnings. But bank stocks were sluggish amid investor skepticism that banks would benefit much from another easing by the Federal Reserve.

Typical of the day's tone were BankAmerica Corp., up 37.5 cents to $42.375; NationsBank Corp., up 12.5 cents to $42; and Chemical Banking Corp., down 12.5 cents to $31.625.

Price movements were even flatter in the over-the-counter market. The Nasdaq bank index rose 0.14%, while the Nasdaq composite index was ahead by 0.45%. The Dow rose 27.01 points, or 0.85%, to 3,201.42. This followed a 37.83 point gain on Monday.

Among the day's big gainers was First Fidelity Bancorp., Lawrenceville, N.J., which was ahead $1, to $37.875, in late trading. PNC Financial Corp., Pittsburgh, rose 50 cents, to $53.

Over the weekend, Federal Reserve Board Chairman Alan Greenspan was quoted as leaving open the possibility of another rate cut.

The Fed disappointed the market earlier this month, when it did not ease despite persistently weak U.S. employment data. But at this point, another rate cut is generally regarded as a mixed blessing for banks.

An easing could help banks if the economy is bolstered and loan demand is enhanced.

Domino Effect on Rates

But at the same time, another downward ratchet in rates would oblige banks to cut the prime rate. That would likely narrow the yawning net interest margins that have powered bank earnings. …

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