Magazine article American Banker

Stocks Rally on Doubts That Fed Will Raise Rates

Magazine article American Banker

Stocks Rally on Doubts That Fed Will Raise Rates

Article excerpt

Bargain shoppers were out in force Monday, driving up bank and other financial stocks in a broad market rally buoyed by sentiment that the Federal Reserve will not boost interest rates today.

The Standard & Poor's index of 31 banks rose 3.3%, and the Nasdaq index of 721 banks rose 3.4%. The Dow Jones industrial average was up 1.3%.

Like other industry stocks, bank equities benefited from investors' starting to see opportunities.

Many financial stocks that have lost much value this year displayed strong gains on Monday, including Boston's State Street Corp.; First Union Corp. and Bank of America Corp., both of Charlotte, N.C.; and Chicago's Bank One Corp.

"People are looking at those stocks that have been beaten up over the past couple of months and are looking for bargains," said Charles Johnson, head equity trader at Blaylock & Partners in New York.

Bank stocks have taken a licking this year in part from fears of future hikes in interest rates by the Federal Open Market Committee, which holds its October meeting today. Also, banks that have failed to meet Wall Street's expectations have stoked investor malaise. But some investors say the decline has its limits and are wading back into the market.

Bank One and First Union, both down more than 40% from their highs this year, have become so cheap that to some investors buying their stock right now is a no-brainer, said David Allaire, co-adviser for Retirement Planning Co.'s Imperial Bank Fund in Providence, R.I. Bank One gained 81.25 cents Monday, up 2.4%, to $35.25. First Union rose 93.75 cents, or 2.7%, to $36.1875.

"They can't get a date right now to the dance," Mr. Allaire said. "But put a little makeup on them, and they look good."

Stock of Bank One, which disappointed the market in August with an announcement that its 1999 earnings would fall 7% to 8% short of expectations, may have found its nadir, Mr. …

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