Bank Stocks Join Rally As Soviet Coup Fails

Bank equities joined the stock market's rally Wednesday as the collapse of the coup in the Soviet Union eased investor fears of a prolonged international crisis.

The turn of events took the wind out of the dollar and bonds, which had seen renewed investor interest this week. Both the dollar and Treasury securities are considered safe havens for investors in times of international crisis.

Short-term interest rates also rose after open market activities by the Federal Reserve suggested that no monetary easing was imminent. Oil prices also reversed earlier gains.

News of the reinstatement of President Mikhail S. Gorbachev sent the Dow soaring 88.10 points, or 3.02%, to 3,001.79. That is the largest gain since Jan. 17, when Allied forces struck Iraq and the market shot up almost 115 points.

Shares of most bank stocks, which on Tuesday began recouping losses from Monday's rout, also surged. Most banks rose between 50 cents and $1.50. In percentage terms, the gains were between 2% and 4% for many issues.

J.P. Morgan & Co. and Bankers Trust New York Corp., which should benefit from the volatile trading activity, led the pack. Bankers was up $2, to $59.75, while Morgan rose $1.75, to $55.25. Wells Fargo & Co., a market bellwether, jumped $1.875, to $80.25.

Gains Are Consistent

Fleet/Norstar Financial Corp. rose $1.375, to $25, while Bank of New York Co. jumped $1.375, to $33.50. Cleveland's Society Corp. rose 75 cents, to $51.

Chase Manhattan was up 75 cents to $21, or 3.7%, on Wednesday. C&S/Sovran Corp. rose 3.9%, to $29.75. Corestates Financial Corp. rose $1.50, to $45.50.

"It's very broad-based," said J. Richard Fredericks, banking analyst at Montgomery Securities, San Francisco. "There's no pattern. It's pretty indiscriminate."

Volume for many bank stocks was less than average, analysts said. That suggested to Mr. Fredericks that much of the gains came from specialists' marking up prices rather than broad institutional interest.

For the week, the American Banker index of 225 banks' stocks was up 0.95%. On Monday the American Banker index fell 2.8%, but rose 1.44% on Tuesday and climbed 2.7% Wednesday.

Among debt securities, three-month Treasury bills rose to 5.43%, up from Tuesday's close of 5.25% and slightly higher than they were trading at Friday Long-term Treasury bonds are also were near Friday's close. Thirty-year U.S. Treasuries were yielding 8.07% in afternoon trading, down slightly from 8.10% before the Soviet crisis erupted.

"Everything is nearly back to where it was on Friday," said Kevin Logan, chief economist at Swiss Bank Corp., New York. "The safety premium built into fixed-income securities has come out."

Yield Curve Reshaped

The differential between long and short rates - the so-called Treasury yield curve - steepened this week to over 2.0%, helping such banks as J.P. Morgan that are positioned TO benefit from a steepening curve. But on Wednesday the curve narrowed to 180 basis points, close to where it was Friday.

"Lower interest rates and a steep yield curve are usually good" for securities departments of banks, said Andre Cappon, partner at Oliver Wyman & Associates. He noted that securities units that hold longer-term bonds can finance them at lower interest rates, boosting the interest margins.

Reserves Withdrawn

The Fed on Wednesday withdrew some reserves, an indication that it it has no immediate plan to ease interest rates. "It looks like steady policy," Mr. Logan said.

However, analysts said that as the financial markets again begin concentrating on fundamental economic issues, there is a good chance the Fed may again move to ease rates.

"There's a general sense that, with the situation stable, there's an increased potential for lower interest rates," said Sandra J. Flannigan, banking analyst at Alex. Brown & Sons.

PHOTO : Wednesday's Top Price Performers

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