Bank stocks staged a recovery Monday, with many of the top 50 banks ending the day on the upside.
Some of the best performers were Chemical Banking Corp., which closed at $39.125, up 75 cents; Chase Manhattan Corp., up $1.625, to $38.50; Bank of New York, up $1.50, to $29.50; and First Chicago Corp., up $1.75, to $49.
First Interstate Bancorp., which Lehman Brothers upgraded Friday to 'buy' from 'outperform', was up 87.50 cents, to $75.50.
"Bank stocks were hit fairly hard last week, but they should remain fairly unscathed" by the end of the quarter, said Moshe A. Orenbuch of Sanford C. Bernstein & Co.
Broader Market Follows
The banks appeared to lead the rest of the market out of the doldrums. By mid afternoon, the Dow Jones industrial average, which had scored a slight gain in listless morning trading, began to surge. The bellwether index closed at 3685.50, up 48.56 points.
Analysts said that after Friday's bloodbath, the market should cruise along at a steady if unspectacular pace. However, they all agree that any major announcement from the government - or international development - could spark a major recovery, or a downfall.
One such announcement, that the Clinton Administration would replace Chief of Staff Mack McClarty with Office of Management and Budget Director Leon Panetta, appeared to be a factor in the late rise.
'A Big Yawn'
Before that the market was
"essentially trading flat," Dean Witter Reynolds analyst Paul Mackey said Monday morning. "It's been a big yawn. Bank stocks are essentially trading flat as well."
Mr. Mackey said investors were waiting to see what second-quarter margins look like.
"They're looking at the foreign-exchange market and trading activities," he said. "We all expect a pretty good quarter."
Many investors are wary, however, because of the highly publicized losses incurred from derivatives trading.
Harris Will Absorb Loss
Harris Trust and Savings Bank, Chicago, said Monday that it would absorb a $51.3 million loss on floating-rate collatcralized mortgage obligations. The loss will be recorded as a $33 million charge against the bank's second-quarter results.
The derivatives, which made up 34 percent of Harris's portfolio, were kept in supposedly low-risk institutional customer accounts. Most of the derivatives have been transferred to the books of Harris's parent, Bank of Montreal.
But this did not appear to affect trading of other bank stocks.
"Bank stocks have given a lot back," said Bear Stearns & Co. analyst Lawrence Vitale. "They are definitely going to try to stabilize."
Bernstein's Mr. Orenbuch said the threat of rising interest rates - as well as the general feeling of uncertainty in the market-- have taken their toll on bank stocks.
However, Mr. Mackey at Dean Witter said that the second quarter should be a good one for bank stocks and that he doesn't foresee anything ominous.