A day after Monday’s stock market rout, bank stocks recovered some of their lost value on Tuesday on extremely high levels of trading volume.
The KBW Bank Index, which follows two dozen large and regional banks, rose 1.7% in Tuesday trading. Most of the largest U.S. banks gained on Tuesday, with the notable exception of Wells Fargo, whose shares fell 2.3% to $56.82 amid ongoing regulatory problems.
Trading volatility was extreme, as stocks swung between gains and losses at least a dozen times on Tuesday, Bloomberg reported.
Bank of America climbed 3.1% to $31.21 on volume of 161 million shares, making it the most active stock in the New York Stock Exchange. JPMorgan Chase's rose 2.9% to close $111.90. U.S. Bancorp dropped 0.2% to $54.52. Bank of New York Mellon jumped 2% to $55.49.
Market watchers attributed some of Tuesday’s gains to strong underlying economic growth and rising corporate profits. The Dow Jones industrial average gained 2.3% to 25,914; the Dow’s 567-point increase was its largest in two years, according to Bloomberg. The S&P 500 rose 1.7% and the Nasdaq Composite Index rose 2.1%.
“The stock market correction appears to be more technical and positioning-driven rather than fundamentally based,” David Kostin, chief strategist at Goldman Sachs, wrote in a Tuesday research note.
But there were also signs of deeper concerns about where the market will head next. Carl Icahn, one of the best-known activist investors, said that heightened volatility is a cause for concern, particularly with the rise of index funds where investors don’t know what they are investing in.
“Passive investing is the bubble right now, and that’s a great danger,” Icahn said in a CNBC interview.
Among regional banks, SunTrust Banks gained 3.2% to $68.43. KeyCorp rose 1.9% to $21.01. First Republic Bank climbed 1.6% to $89.60.
The ABA Nasdaq Community Bank Index rose about 1%. Among components of that index, the $1.7 billion-asset SmartFinancial in Knoxville, Tenn., rose 3.8% to $21.82; and the $1.6 billion-asset Central Valley Community Bancorp in Fresno, Calif., gained 2.4% to $19.19.