Magazine article American Banker

Stocks: Commerce, Purchasing News Sets off Bank-Stock Revival

Magazine article American Banker

Stocks: Commerce, Purchasing News Sets off Bank-Stock Revival

Article excerpt

Investors desperate to scoop up bargains in the banking sector found reason to buy after a flurry of economic news Thursday.

But some economists said investors misinterpreted the reports issued by the Commerce Department and the National Association of Purchasing Management in Chicago.

"Investors jumped the gun," said Scott J. Brown, an economist at Raymond James & Associates of St. Petersburg, Fla. "The fundamental picture of the economy has not changed. We are still in a very gray area."

Still, after a week of languishing, the Standard & Poor's bank index gained 2.50%, the Dow Jones industrial average 1.21%, the Nasdaq bank index 1.55%, and the S&P 500 index 1.13%.

Gainers included Firstar Corp., up $1.50, or 6.22%, to $25.625; Wachovia Corp. $3.3125, or 4.40%, to $78.625; and Chase Manhattan Corp. $2.375, or 3.25%, to $75.375.

Low valuations of bank stocks are finally beginning to work their magic on even the most fearful investors, analysts said.

"Some banks have had some big problems that were well publicized," said Hugh Mullin, senior portfolio manager for Putnam's Growth and Income Fund, which has 14% of its $42 billion under management in bank stocks. "But the businesses of most of these banks are reasonable, and stock prices are at very attractive levels."

Bank stocks have been at low levels for a while, but Thursday's economic reports -- which many interpreted as indicative of a slowing economy -- emboldened investors to buy.

The National Association of Purchasing Management-Chicago said its monthly index of regional manufacturing fell lower than expected, to 53.8, from 56.1 in August, suggesting that inflationary pressures are easing up. But Mr. Brown of Raymond James said that investors overlooked the fact that the price index -- a subsection of the total index -- rose to 71. …

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