Bank and thrift stocks inchedup during Wednesday, March 30, along with the broader markets, whichJeff Davis, managing director of the financial institutions group at Mercer Capitaland an S&P Global Market Intelligence contributor, thinks was because of the"residual digestion" of Federal Reserve Chair Janet Yellen's Tuesday, March 29.
"Yesterday, while we had a few regional governors speakingabout the potential to raise rates sooner, she basically poured cold water all overthat," said Davis during an interview.
The SNL U.S. Bank Index added 0.86% to 383.59 and the SNL U.S.Thrift Index climbed 0.48% to 792.69. Meanwhile, the Dow Jones Industrial Averagerose 0.47% to 17,716.66, the S&P 500 increased 0.43% to 2,063.95 and the Nasdaqcomposite index advanced 0.47% to 4,869.29.
Among large banks, Bankof America Corp. rose 0.45% to $13.48, Citigroup Inc. climbed 0.38% to $41.88, increased 1.15%to $59.71 and Wells Fargo & Co.advanced 1.25% to $48.65.
Davis pointed out that large banks were up fractionally more,compared to the market, by close of business. He thinks that banks need the Fedto raise short rates to support their net interest margins, so he finds the reactionbefuddling. "I think we are getting set up for the opposite outcome, wherethey [rates] don't raise very much more, if at all. If the economy continues toslow, long-term rates will trend lower. So it's the worst of both possible worldsfor banks. That is, the Fed doesn't raise the short end, and to revalue the depositsif you will, and in the long and intermediate term, rates trend lower and thereforelower yields. That's just another pressure point on asset yields," he added.
On the other hand, he thinks that if the Fed is not going toraise rates during the balance of 2016, and have a very dovish stance for 2017,"credit cycle gets extended and therefore credit losses for banks get pushedfurther into the distant future."
In macroeconomic news, mortgageapplications in the week ending March 30 slipped 1.0% from one weekearlier, on a seasonally adjusted basis, the Mortgage Bankers Association reported,citing the results of its weekly mortgage applications survey. On an unadjustedbasis, the market composite index, which measures mortgage loan application volume,decreased 1% week over week.
Private sectoremployment increased by 200,000 jobs in March, according to the recentlyreleased ADP National Employment Report. The February jobs gain was revised downwardto 205,000 from 214,000.
In March, job gains in large businesses decreased to 39,000,compared to February's 77,000. Small businesses recorded the largest increase inthe month in terms of company size as they added 86,000 employees over the courseof the month, compared to February's downwardly revised 68,000. Employment in mediumbusinesses increased by 75,000, up from 60,000 added in February.
On the M&A front, Boston-based State Street Corp. saw its stock increase 0.64% to $58.52amid news that the company agreed to acquireGE Asset Management Inc.from General Electric Co.in a cash transaction with a purchase price of $435 million, subject to adjustments,with up to an additional $50 million tied to incremental opportunities with GE.
Champaign, Ill.-based FirstBusey Corp. gained 0.54% to $20.50, as the company shareholders March29 approved the acquisitionof St. Louis-based Pulaski FinancialCorp., according to a Form 8-K filed March 30. Pulaski Financial wasup 0.69% to $16.16.
In other banking news, approximately 94.1% of first-lien mortgagesserviced by eight national banks were current and performing at the end of the fourthquarter of 2015, in comparison to the 93.9% a quarter earlier, according to theOCC's fourth-quarter 2015 mortgagemetrics report released March 30.
Among notable movers, San Juan, Puerto Rico-based rose 4.29% to $2.92,while Los Angeles-based BBCN BancorpInc. added 2.64% to $15.15.
Among thrifts, Westbury, N.Y.-based New York Community Bancorp Inc. gained 0.31% to $15.96; LakeSuccess, N.Y.-based Astoria FinancialCorp. climbed 0.51% to $15.91; San Diego-based BofI Holding Inc. added 0.75% to $21.43; and Cleveland-basedTFS Financial Corp. (MHC)went up 1.57% to $17.52.
Market prices and indexvalues are current as of the time of publication and are subject to change.