Magazine article American Banker

In Rare Role, Banks Lead a Market Rebound

Magazine article American Banker

In Rare Role, Banks Lead a Market Rebound

Article excerpt

Banks stocks rallied Wednesday, outpacing the market for the first time in almost a month, but many investors remain nervous and wary.

The Standard & Poor's bank index soared 2.31%, while the Dow Jones industrial average rose only 1.06%. The Nasdaq bank index climbed 1.33%, and the S&P 1.43%.

Shares prices of most of the top 50 banks rose. Gainers included First Union Corp., up $2.375, to $56.3125; Citicorp, $2.35, to $147; and Comerica Inc., $2, to $56.3125.

The recovery came a day after bank stocks were rocked by one of the deepest selloffs of the year. And Tuesday's experience left a deep impression on many investors.

On Wednesday, stability in Asian markets lifted the pall from Wall Street, and relatively low prices for stocks lured bargain hunters. Still, fears of a reappearance of market volatility and of further negative news from overseas continue to nettle some of the most bullish investors.

"Overall, this rally is a relief rally but not an enthusiastic recovery," said Scott Edgar, director of research at SIFE Trust Fund. "Not everyone is convinced that the near-term bottom has been reached."

He voiced the worry of many investors: "I am more concerned about what will happen when we stop correcting. Will the market regain its highs, or will we muddle along in a trading range?"

James Ellman, portfolio manager of AIM Global Financial Services Fund also expressed caution about the future of bank stocks.

"My screen is nice and green now, but I don't know if we are on our way to a nice steady rebound," he said.

Mr. Ellman, who is still fairly optimistic, said investors remain troubled by the financial tumult of overseas economies and the possibility of an inverted treasury yield curve-in which longer-term yields fall below those of shorter maturities.

An inverted curve means tougher going for bank profits and typically signifies an economic slowdown or even recession. …

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