Shares of the biggest U.S. banking companies rose with the broader market in pre-election trading Monday.
Bank of America Corp.s shares rose $2.375, or 4.88%, to $51.0625; Citigroup Inc.s 93.75 cents, or 1.74%, to $54.875; and J.P. Morgan & Co.s $4.8125, or 2.98%, to $166.3125. The rise was generally attributed to the indications that Texas Gov. George W. Bush had an election-eve edge. But analysts said there was no clear sense that a Gore victory would hurt big banks.
Investment banks dropped, led by Morgan Stanley Dean Witter & Co., off $3.3125, or 3.96%, to $80.25; and Lehman Brothers, down $1.625, or 2.61%, to $60.6875.
The American Banker index of 225 banks gained 0.6%, while the index of top 50 banks rose 1.25% with the Dow Jones industrial average, which was up 1.47%. The Nasdaq composite dropped, closing down 1.02%.
Salomon Smith Barney initiated coverage for Fifth Third Bancorp with a buy rating, which may reflect optimism about growth in the heartland. Salomon analyst Keith Horowitz wrote in a research report that the Cincinnati banking company has a better than average business mix and can continue to increase its earnings per share by 15%. He set a price target of $65 a share.
On Monday, Fifth Third closed at $51.8125, down 1.25 cents, or 0.24%.
Adam J. Lewis, the head of bank stock trading at Keefe, Bruyette & Woods, said that the market in general would probably react more positively to a Bush victory, but that it would be less important to financial stocks than to those of drug companies and other industries.
I find the market very short-term-oriented act now and worry later, Mr. Lewis said. A Bush victory could be the fuel the market is looking for right now.
The Texans plan to let individuals invest some of their Social Security savings in stocks could spark an upswing in the broad market, lifting financial shares with it. On the other hand, strategists said, Gov. Bushs tax cuts could cause inflationary worries that would dampen financial stocks.
Lawrence Kudlow, the chief U.S. economist and chief investment strategist at ING Barings, predicted that Gov. Bushs credentials will carry him to victory and the stock market to new highs.
Strategists said none of Vice President Gores policy proposals provide as big a stimulus as Gov. Bushs Social Security plan. Rather, the Gore presidency would provide a soft landing of the U.S. economy, they said.
Still, Mr. Lewis said the market would probably not react negatively to a Gore victory.
Scott J. Brown, chief economist at Raymond James & Associates of St. Petersburg, Fla., agreed. Investors might be disappointed, he said, but they would not be discouraged.
Economists and strategists said much would depend on Capitol Hill. While the Senate is expected to hold its Republican majority, the Democrats have a chance to wrest control of the House of Representatives.
That is the most important issue, Mr. Lewis said.