Magazine article American Banker

Bank Stocks Gain on News of Decline in Retail Sales

Magazine article American Banker

Bank Stocks Gain on News of Decline in Retail Sales

Article excerpt

Bank stocks surged Thursday after the Commerce Department released economic data suggesting that inflation is becoming less of a problem.

Although the figures somewhat dampened concerns about the possibility of the Federal Reserve raising interest rates 50 basis points at its meeting Tuesday, skepticism in the market remained fairly high about whether Thursday's rally was sustainable.

"This is not a significant rally; there is relatively no volume," said Charlotte A. Chamberlain, analyst at Jefferies & Co. Inc., Los Angeles. "The major event is the Fed meeting. That will set the tone. This rally is a dead cat bounce; we are not making up what we lost."

The American Banker's index of the 50 largest banks rose 2.62%, while its index of 225 banks rose 3.54%. The indexes are off 20.25% and 26.88%, respectively, from their highs of 657.0912 and 896.6938.

Gainers included Boston-based State Street Corp., up $5.1875, or 5%, to $109; Pittsburgh-based PNC Financial Services Group, up $1.625, or 3.78%, to $44.625; and J.P. Morgan & Co., up $5, or 4.08%, to $127.625.

Retail sales fell in April for the first time more than a year and a half, after having risen more than expected in March, the Commerce Department reported. Sales fell 0.2% to $266 billion, following a 0.5% gain in March. The department had estimated a 0.2% gain in March.

The figures superficially suggest that the economy is slowing, and hence might make Federal Reserve policy-makers less aggressive about raising interest rates Tuesday. The thinking in the market is that the Fed will raise overnight bank lending rates 50 basis points instead of the usual 25 because of concerns about the strength of consumer demand. …

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