Bank stocks advanced Wednesday after three days of losses, as investors navigated a maze of conflicting signs on the health of the economy and banks' earnings prospects.
"It's not clear who will provide leadership in the group," said Kathy Cole, a bank analyst at Bank One Investment Advisors. "Some days the safe- haven regionals perform well; other days it's the money-centers, and it's unusual for that to happen so often in a month."
It was the money-center banks' turn to shine Wednesday. Shares of Chase Manhattan Corp., Citicorp, and J.P. Morgan & Co. all rose after rumors dissipated that Brazil would devalue its currency. These companies all have substantial exposure to Brazil and other Latin American countries.
"It's a spastic market," said Credit Suisse First Boston bank analyst Michael Mayo. "It sells off when emerging-market concerns arise and returns when those fears are untrue."
A handful of regionals also fared well, particularly Wachovia Corp., which rose $2.625, to $85.625, the day after announcing it would buy the Charlotte, N.C. brokerage Interstate/Johnson Lane Inc. for less than market value.
But investors are still grappling with a host of unknowns that complicate putting money into bank stocks.
There is no consensus on whether the stock market has stabilized-in large part because it is unclear whether the economy will head into recession, revert to the slow growth pattern demonstrated three years ago, or neither of the above.
Trying to analyze it all "is like breathing mud," Ms. Cole observed.
Bank managements have been advising since August that earnings growth would slow next year, and people who attended a regional banking conference sponsored by Warburg Dillon Read this week say CEOs were telling the same story. Several banks have announced they will fire thousands to meet Wall Street's earnings expectations.
Some companies are demonstrating particular trouble with the low interest rates.
First Boston's Mr. Mayo said such companies as Summit Bancorp, Crestar Financial Corp., and First Virginia Banks Inc. missed third-quarter earnings estimates because of net interest margin pressure.
He recently cut 1999 earning estimates for Summit to $2.80 per share from $3.
