After being pummeled for days by investor concerns over the industry, Bank of America Corp. and U.S. Bancorp led a bank stock rally Monday.
The KBW Bank Index rose 5.26% after falling 22.93% last week. "The index last week fell to its lowest level in history, so one can say that today it's a dead-cat bounce," said Gary Townsend, the chief executive at Hill-Townsend Capital LLC.
B of A rose 61 cents, to $3.75. Citigroup Inc. rose 2 cents, to $1.05, and U.S. Bancorp rose 15.5%. JPMorgan Chase & Co. fell in the last hour of trading to close off 0.2%. The New York company reportedly was set to sell one of its trading units, Bear Wagner Specialists LLC, to Barclays Capital.
"Last week there was a high level of fear, which outweighed fundamentals, and there was a race to zero," said Sean Clair, a trader at Boenning & Scattergood Inc. in West Conshohocken, Pa. "That fear seems to have subsided over the weekend, and we're hopefully seeing a bounce off the bottom."
Investors are anticipating a House subcommittee meeting this week on the elimination of mark-to-market accounting rules, he said. "Any adjustments to mark-to-market accounting are welcome by the marketplace — the assets on banks' balance sheets will be valued at more of a fair value," Clair said.
Kenneth Lewis, B of A's chairman and CEO, wrote in an op-ed published Monday in The Wall Street Journal that despite claims to the contrary, most banks are lending. The Troubled Asset Relief Program is working, and the companies that caused the most damage during the "bubble economy" are now gone, he wrote.
Among regionals, PNC Financial Services Group Inc. rose 6.5%. Huntington Bancshares Inc. rose 6 cents, to $1.08. Fifth Third Bancorp rose 10 cents, to $1.39. Regions Financial Corp. rose 33 cents, to $3.27, and KeyCorp rose 13.1%. Capital One Financial Corp. rose 5.1%. It said it had cut its dividend 87%, to 5 cents a share.
SunTrust Banks Inc. rose 7.8%. Albert Savastano, an analyst at Fox-Pitt Kelton Cochran Caronia Waller, wrote in a research note Monday that he was maintaining his "outperform" rating on the Atlanta company's stock and his estimates of a loss of $2.80 a share for this year, and a gain of $1.05 for next year.
Savastano wrote that he met with SunTrust's managers and got the sense that they were not worried about needing more capital after it completes the government's stress tests.
The broader markets fluctuated but closed in negative territory. The Dow Jones industrial average fell 1.21%, and the Standard & Poor's 500 fell 1%.