Bank stocks continued to rebound Thursday, as a rising bond and stock market helped pull financial services equities higher.
The Standard & Poor's index of major banks rose 1.16% Thursday, while the overall S&P index rose 1.66%. The 30-year Treasury bond was up more than half a point at midday.
"The bond market seems to have gotten its sea legs back," said Thomas Theurkauf, a bank analyst with Keefe, Bruyette & Woods Inc. "With the bond market having turned the corner, financial stocks are doing very well."
On Wednesday, the market was boosted by remarks from Federal Reserve chairman Alan Greenspan that the economy was in a slow patch, indicating to many investors the Fed would still consider cutting interest rates.
On Thursday, the U.S. Labor Department released higher-than-expected weekly jobless claims, reinforcing those hopes. The Labor Department said jobless claims for the week ending Feb. 17 rose to 391,000, from a revised 386,000. Wall Street economists had expected the lower figure.
Money-center banks in particular were buoyed by the rising bond market. Chase Manhattan Corp. rose $1.125 to $72.625, Republic New York Corp. rose $1.125 to $61.50, and Citicorp. rose 87.5 cents to $77.75.
First Bank System Inc. continued to soar a day after announcing a major extension of its share repurchase program. Shares in the Minneapolis bank rose $2 to $58.50, after rising $2.75 the previous day.
News that First Bank was repurchasing shares seemed to have calmed investors who were still unnerved by the bank's unsuccessful, high stakes battle for First Interstate Bancorp, which Wells Fargo & Co. agreed to buy last month.
Since the bank put that situation behind it, received its termination fee, and announced a stock buyback, the share price has moved from its low point, which was less than $50 a share, said Carole Berger, a bank analyst with Salomon Brothers.
Another beneficiary of a share repurchase announcement was Huntington Bancshares, which Wednesday said it would buy back 10 million shares. Thursday, it shares rose 50 cents to $23.875.
Washington Mutual Inc. shares fell 12.5 cents to $30.625 after Pacific Crest Securities downgraded the thrift to "hold" from "buy" on price.
The Pacific Crest analyst said the bank's stock had risen by one-third since July, and the company would have difficulty maintaining its growth rate.
The firm predicted a growth rate of 10% to 12%, and said Washington Mutual may be pressured to seek acquisitions to supplement internal growth.