Citicorp shook off a blue Monday to lead bank stocks to yet another market-beating rally Tuesday.
The New York bank's stock shot up a whopping $6.43 to $130.56, more than compensating for its $2.50 per share loss on Monday amid rumors that Saudi Prince Waleed bin Taleel would dump his 12 million shares.
An upgrade to "near-term buy" from analyst Judah S. Kraushaar of Merrill Lynch & Co. may have helped Citicorp's climb. He raised his target price for the stock to $168.
Mr. Kraushaar is convinced Citicorp can deliver on its financial goals, continue generating strong growth and excess capital, and accomplish cost- cutting measures. "We view any weakness as a buying opportunity," he said.
Bank analyst Henry C. Dickson of Smith Barney is another Citicorp bull. Citicorp has "a tremendous amount of potential," he said. The company is concentrating on consistent operations across its global markets, which Mr. Dickson said Citicorp could dominate over time. He expects the stock to hit $150 within 18 months.
Not so, said George Salem of Gerard Klauer Mattison. Despite the stock's run-up on Tuesday, Mr. Salem expects Citicorp to weaken.
Mr. Salem said the stock's sprint on Tuesday "is strictly a function of the army of brokers Merrill (Lynch) has. They have real clout over the near term, but they can't prop the stock up" forever. He expects Citicorp to trade in the $115 to $119 range. "The stock should lag its group because of two challenges: poor credit card earnings in the U.S. and turmoil in its Asian markets."
The analyst also expressed concern over the quality of second-quarter earnings, which he said were enhanced with trading and venture capital gains, instead of traditional core business growth. He rates the stock "hold."
Mr. Salem instead favors Chase Manhattan Corp., up $2.625 to $108.875, NationsBank Corp., up $1.75 to $69.625, and Bank of New York Co., which gained 87.5 cents to $47.43. He called those shares undervalued.
Bank stocks led a market rally on Tuesday, as the Standard & Poor's bank index jumped 2.10% to 587.53, easily outpacing the overall market. The S&P 500 reached 942.29, a 0.62% gain, and the Dow Jones industrial average rose 53.43 points to 8,174.53, a 0.66% increase.
The government said wage, salary, and benefit costs for the period from April through June rose just 0.08%, increasing investor confidence in stable interest rates and good prospects for banks.
"The employment cost index was benign, a budget deal is imminent, and second-quarter earnings were good," said Michael Mayo, banking analyst with Credit Suisse First Boston. "What more can you ask for? Clearly investors are looking to own bank stocks."
American Express Co. made significant strides on the day after second- quarter earnings, reported late Monday, exceeded analysts' expectations. The stock rose $3.56 to $82.43.
Other gainers included J.P. Morgan & Co., which jumped $3.50 to $114.25, and Wells Fargo & Co., up $5.06 to $271.
Jefferies & Co. downgraded FirstFed Financial Corp. to "accumulate" from "buy" because "the share price over-estimates the certainty that the California thrift's credit quality and earnings will increase dramatically with Southern California's improving economy." The stock rose 6 cents, to $34.325.
