Stocks of big banks outperformed the market Wednesday, encouraging analysts to suggest that the industry's stocks may become the market's new leaders.
The Standard & Poor's Bank Index climbed .86%, again outgaining the Dow Jones industrial average, which climbed .34%. Meanwhile, the S&P 500 rose .91%, while the Nasdaq bank index gained .81%.
Nasdaq banks usually trade lower because of less liquidity in their stocks, said analysts.
Nevertheless, analysts said they see the bigger bank stocks shouldering past technology stocks as the new market leaders, based on their steady performance in choppy times.
"Banks are leading the market today," said Michael L. Mayo, an analyst with Lehman Brothers Inc., New York. "It is definitely possible that banks could lead the market for the next couple of quarters, which for many investors is a refreshing alternative to technology stocks."
He added that the only menace to banks would be a interest rate hike.
Higher rates are likely to reduce lending volume and put pressure on banks' interest margins.
Most bank stocks held onto gains during the day. Some of the highest fliers were Citicorp, which rose $1.375 to close at $78.75; NationsBank, which closed at $80.625, up $1.50 ; Fifth Third Bancorp, up $1.125, to close at $51.375; and Banc One, up 50 cents, closing at $33.25.
Robust earnings led to the heady stock prices, analysts said.
Meanwhile, the day's scant losers included banks reporting lower-than- expected earnings. These included CoreStates, which fell 12.5 cents, closing at $37.50; SunTrust, off 12.5 cents at $35.875; and Wells Fargo, which finished at $221.25, down $6.75.
Analyst Richard X. Bove of Raymond James & Associates, St. Petersburg, Fla., said the market is finally recognizing the value of banks. The irony, he said, is that investors have placed their money in new companies with overinflated multiples and have no dividends, while "banks have been around for 100 years, have a real solid franchise, and yields over 3%.
