Magazine article American Banker

After Fed Rate Jolt, Bank Stocks Hold Their Own

Magazine article American Banker

After Fed Rate Jolt, Bank Stocks Hold Their Own

Article excerpt

Bank stocks held their ground in a market selloff Wednesday, as bargain hunting buffered the sector. Analysts noted banks were trading at a greater discount to other stocks than usual, now that the industry has been beaten down by interest rate worries. One day after Federal Reserve policymakers hiked short-term interest rates 50 basis points, the Dow Jones industrial average was off 164.4 points, or 1.51%, to 10,769.74, and the Nasdaq index fell 72.6 points, or 1.95%, to 3,644.9. The American Banker index of the 50 largest banks also slipped, but only by 0.79%. Analysts said that Tuesday's rate hike would restrain bank earnings in the near future, but market reaction was muted because the move had been anticipated. J.P. Morgan edged up 68.75 cents, or 0.52%, to $132.625, on modest volume, continuing a rebound from $122.625 May 10. Investors hit M&T Bancorp after it announced Wednesday that it would purchase Keystone Financial Inc. for $1 billion in cash, but its stock was down only 3.39%, which is less than banks sometimes fall when they announce deals, said David Berry, an analyst at Keefe, Bruyette & Woods Inc. John Balkind at Fox-Pitt, Kelton said the sector as a whole is undervalued. Assuming there is not another 100 basis point tightening, Fox-Pitt is recommending such banks Bank of New York, Firstar Corp., and Mellon, partly because these firms have moved to fee-based asset management businesses. Elsewhere, shares of Countrywide Credit Industries dropped $3.3125, or 9.81%, to $30.4375, as analysts dismissed speculation that the big mortgage bank may be for sale, and focused instead on the implications of rising rates for the home loan business. …

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