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Wednesday's Bank Stocks: Global reflation, Trump's swerve, reflexivity

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Wednesday's Bank Stocks: Global reflation, Trump's swerve, reflexivity

BofI Holding Inc. closed 4.02% lower at $26.95 on Wednesday, March 29, trading 5,245,060 shares, approximately 6.5x its average trading volume.

FBR & Co. analyst Bob Ramsey noted that the sell-off was because of a confusion over a document filed in a New Jersey Bankruptcy court. The claim alleges that a loan from Quick Bridge, issued through BofI Holding, was not valid in dismissing a debt. The claimant is employed by a division of the U.S. Department of Justice, but is not an employee of the Justice Department. However, the position led to the confusion that the allegation was made by the department.

Ramsey noted that the allegations, which are actually directed at Quick Bridge, are not uncommon in the banking industry. He thinks that this selloff creates an attractive entry point to invest in BofI Holding.

Meanwhile, U.S. bank and thrift stocks closed the business day in negative territory.

The SNL U.S. Bank Index was down 0.47% to 531.89, and the SNL U.S. Thrift Index decreased 0.67% to 907.84. The Dow Jones Industrial Average slipped 0.20% to 20,659.32, the Nasdaq composite index added 0.38% to 5,897.55, and the S&P 500 edged 0.11% higher to 2,361.13.

Robert Dye, chief economist at Comerica Bank, believes that three factors have been driving the markets lately. "I think the global reflation story is fundamental," said Dye noting that it is showing up in U.S. and major economies.

"And then you add on top of that what I call the Trump's swerve, where U.S. political environment has taken a very strong turn," said Dye. The third factor is "reflexivity." Dye noted that oil prices have dipped a little bit and there is a very brief sell-off in stocks. Additionally, there are increased doubts about the Trump's administration ability to get all its agenda through, given the stumble on health care.

"I think that the market is at a very interesting place right now. My sense is that underlying fundamentals are in good place [and] the global macro story is strong. But, I think there is a re-evaluation now of how much the Trump administration can do," said Dye.

"Given the political battles, I think it's very important to the economy because Trump came in with such a strong pro-growth agenda. There was an expectation that he will achieve some of that," Dye said in an interview. However, he added that given the constraints to the budget and interconnectedness of Trump administration policies, "it will be very challenging to see what can be accomplished with tax reforms and trade and any kind of fiscal stimulus going forward."

JPMorgan Chase & Co. slid 0.37% to $88.27, Bank of America Corp. slipped 0.55% to $23.35 and Wells Fargo & Co. decreased 0.52% to $55.67.

Citigroup Inc. closed 0.05% lower at $59.39, as the company won the arbitration case pursued by Abu Dhabi Investment Authority over losses related to the U.S. mortgage crisis, Reuters reported March 29.

On the M&A front, First Bank climbed 1.77% to $11.50, amid news that the Hamilton, N.J.-based company has agreed to acquire Doylestown, Pa.-based Bucks County Bank in an all-stock transaction valued at approximately $27.2 million. Bucks County Bank soared 31.74% to $10.75.

Among price movers, First NBC Bank Holding Co. climbed 8.22% to $3.95, Mercantile Bank Corp. advanced 5.97% to $36.41, and Bankwell Financial Group Inc. jumped 7.37% to $33.50.

In the thrift space, New York Community Bancorp Inc. decreased 1.42% to $13.91, and SI Financial Group Inc. edged 2.17% lower to $13.55.

On the regulatory front, Federal Reserve Bank of Chicago President Charles Evans says he still sees the central bank on pace to raise its benchmark interest rate one or two more times in 2017. Federal Reserve Bank of Boston President Eric Rosengren, meanwhile, would like U.S. central bank officials to consider raising interest rates four times this year.

Overseas, the U.K. is officially on its way out of the European Union.

In economic news, pending home sales in the U.S. rebounded sharply in February to the highest level in almost a year and hit the second-highest level in more than a decade, the National Association of Realtors reported. The association's Pending Home Sales Index jumped 5.5% to 112.3 in February, from 106.4 in January.

Mortgage applications slipped 0.8% on a seasonally adjusted, on a week-over-week basis in the week ended March 24, the Mortgage Bankers Association reported, citing its latest weekly mortgage application survey.

Market prices and index values are current as of the time of publication and are subject to change.