Bank stocks spiked Thursday on news of better-than-expected gains in domestic output and falling unemployment claims.
The KBW Bank Index rose 4.46% after the Commerce Department said the gross domestic product increased at an annual rate of 3.3% for the April-to-June period, much better than the government's initial estimate of 1.9% and economists' estimate of 2.7%, according to Thomson Reuters.
Unemployment claims fell to a seasonally adjusted 425,000 for the week that ended Aug. 23, a drop of 10,000 from the previous week, according to the Labor Department. On average analysts had expected 427,000 claims, according to Thomson Reuters.
Gainers Thursday included several large-cap banking companies. Wachovia Corp. rose 9.9%; Washington Mutual Inc. 9.6%; SunTrust Banks Inc. 5.7%; Bank of America Corp. 6%; and Citigroup Inc. 5.3%.
Gary B. Townsend, the chief executive of Hill-Townsend Capital LLC, said Thursday's economic news, coupled with a report Wednesday on the rise of durable goods orders, "suggests that the economy is stronger than what many have presumed," which should help many banking companies' performance.
On Wednesday the KBW Bank Index rose 1.5% after the Commerce Department announced that orders for durable goods in July rose 1.3% from the previous month, reaching a seasonally adjusted $219 billion. Economists generally had expected demand to be flat, according to Thomson Reuters.
Thursday's other notable gainers included KeyCorp, 5.8%; Marshall & Ilsley Corp., 6.9%; Midwest Banc Holdings Inc. in Melrose Park, Ill., 14.1%; and Alliance Bankshares Corp. in Chantilly, Va., 43.87%.
The broader markets were also buoyed. The Dow Jones industrial average rose 1.85% and the Standard & Poor's 500 rose 1.48%.
Jeff Davis, an analyst at First Horizon National Corp.'s FTN Midwest Securities Corp., said trading was still very light with the Labor Day weekend approaching. In September bank stocks may fall as companies begin to speculate publicly on their third quarter earnings in investor conferences, particularly if they revise their earnings guidance downward, Mr. Davis said.
Decliners Thursday included Atlantic BancGroup Inc. in Jacksonville Beach, Fla., 17.4%; Cape Fear Bank Corp. in North Carolina, 9.6%; and BankUnited Financial Corp. in Coral Gables, Fla., 4.31%.
Shares of the $14.3 billion-asset BankUnited have fallen this week since it said in a Securities and Exchange Commission filing late Monday that, though it is considered well capitalized, the Office of Thrift Supervision would likely reclassify it as only adequately capitalized if it fails to raise an additional $400 million of capital.