Bank stocks advanced Thursday amid light holiday trading.
The S&P Bank index rose 0.83% to 468.73, while the Nasdaq bank index gained 0.15% to 1265.4. The Dow Jones industrial average rose 0.37% to 6546.68.
Analyst Jerry Gitt of Merrill Lynch & Co. upgraded Bank United Corp. to "accumulate" from "neutral." Shares in Lewis Ranieri's Houston-based thrift rose $1.875 to $26.875 after the upgrade.
Wells Fargo & Co. benefited from investors' good will, gaining nearly $4 before falling back to close the day up $2.75 to $280.25.
Citicorp and Chase Manhattan Corp. also profited for the day. Citi gained $1.375 to $106.625; Chase was up $1 to $92.50
Marshall Acuff, chief investment officer of Smith Barney & Co., said he had an optimistic outlook for 1997.
"We look at the bank stocks as growth vehicles, going forward" Mr. Acuff said, praising the group's history of excess capital, strong earnings and dividends, and active capital management programs.
But Mr. Acuff does not share the enthusiasm for small-capitalization bank stocks that has arisen lately. "The best quality companies tend to be the large caps, and I don't see that changing. Though small caps may be lifted a bit this season, profits will gravitate to the larger blue chip companies."
Mr. Acuff expects bank stocks to achieve even higher valuations in 1997 and 1998 than the S&P 500.
Mark Zandi, chief economist of Regional Financial Associates in West Chester, Pa., also spoke highly of the bank group. 'There's a lot of optimism built into the market right now," he said.
Observers also pointed out that bank stocks might continue to climb as investors choose to hold up to their gains rather than selling to register an end-of-year gain. That's because investors may be waiting for a favorable change in capital gains tax treatment from Washington. (The Internal Revenue Service has proposed such a change; see story on page 3.)
"Clearly, capital gains are in the back of everyone's minds," said Mark Fitzgibbons of Sandler O' Neill & Partners. "We may see lighter trading than usual, since by and large, the group hopes to defer those gains to 1997."
