Magazine article American Banker

Rate Cut Puts Banking Stocks on Roller Coaster

Magazine article American Banker

Rate Cut Puts Banking Stocks on Roller Coaster

Article excerpt

Bank stocks ended mixed on Wednesday after a volatile afternoon, sliding but then recoveringafter the Federal Reserve's quarter-percentage-point reduction in short-term interest rates.

Small-cap companies appeared to fare slightly better than larger names, many of which traded down immediately after the Fed's 2:15 p.m. announcement.

There was some disparity among larger individual names and initially among larger and smaller-cap companies.

CitigroupInc. and JPMorgan Chase & Co. traded in different directions. Citi closed down 0.5%, while JPMorgan gained nearly 1%. Wachovia Corp. fell 0.6%,Comerica Inc. fell 0.5%, andBank of America Corp., which lost some ground initially, rose 0.6%.

"Bigger picture, we are seeing a disparity between the two," said Joseph C. Morrissey, a bank stock trader at Boenning & Scattergood Inc.

"In terms of the Fed action, there is ultimately greater upside for the larger banks," he said.

The America's Community Bankers index traded up right after the Fed announcement, and though the Standard & Poor's 500 bank index dipped, both closed in positive territory.

The American Banker index of 225 bank stocks and the AB 50 closed up 0.4%, and the thrift index increased 0.8%.

The Standard & Poor's 500 rose 1.2%, and the Dow Jones industrial average rose 1%.

Traders said that some banks stocks fell on the Fed's thinly veiled warning against counting on another rate cut soon.

"I think that speaks to why you saw those go down," Mr. …

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