After a lull, buyers pile into financial stocks again
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The financial sector led Wall Street into the abyss last fall -- and it still seems determined to lead it out.
On an otherwise down day for the stock market, major financial shares surged Wednesday for a third straight session.
An index measuring the performance of the 79 financial stocks in the Standard & Poor’s 500 jumped 3.3% to its highest level since Nov. 7, even as the S&P overall eased 0.3% for the day.
Citigroup shot up 33 cents, or 10.2%, to $3.58. Bank of America rose $1.02, or 6.5%, to $16.66. Private-equity and hedge fund manager Blackstone Group rocketed $2.03, or 15.7%, to $14.96.
Nicolas Colas, chief market strategist at brokerage BNY ConvergEx in New York, said it was a good sign, not a bad one, that the banks, money managers and other financial players that survived last year’s meltdown are attracting a second wave of investors after the May-June lull that followed their spring surge.
‘Financials are still the tip of the spear in this rally,’ he said.
Wild gains Wednesday in some of the most speculative shares -- including Fannie Mae and Freddie Mac, both controlled by the government -- suggested that traders were in a frenzied pile-on, which often is what happens when rallies are peaking.
But the sector also was underpinned by some solid fundamental news, Colas said. American Express said its level of credit-card writeoffs fell in July for a second straight month, suggesting that the economic situation was ‘stabilizing,’ CEO Ken Chenault said during an investor presentation.
Radian Group, the third-largest mortgage insurer, reported an unexpected second-quarter profit, stunning investors. The firm’s shares zoomed $3.05, or 83%, to $6.72.
Fortress Investment Group, which like Blackstone manages private-equity and hedge funds, jumped 55 cents, or nearly 13%, to $4.85 after reporting quarterly results that beat estimates.
It has helped, of course, that the Treasury, the Federal Reserve and the Federal Deposit Insurance Corp. have made trillions of dollars in cheap credit available to banks, brokerages and other players, aiming to revive them.
In any case, the earnings data are emboldening investors who want to believe that ‘the companies are catching bottoms’ in their operations, said Jon Najarian, co-founder of trading firm optionmonster.com in Chicago.
And for the broader economy -- still credit-starved -- one key to a sustained recovery is healthier financial firms that are more willing to lend and invest, Colas noted.
For that reason, he said, he’d be much more concerned if he saw the stock market rallying without financial stocks helping to lead the way.
-- Tom Petruno