Financial stocks bounced back Thursday as the Commerce Department announced a surprise decline in the U.S. trade deficit, which narrowed in August by $2.3 billion from the previous month, to $29.4 billion.
Exports increased 4.4%, while imports rose just 0.7%.
Stan Shipley, a senior economist at Merrill Lynch & Co., predicted that the real gross domestic product should advance at more than a 3% pace, which should satisfy the Federal Reserve without risking recession.
One of the winners Thursday was FleetBoston Financial Corp., whose shares rose more than 4.45% despite mixed grades from analysts.
Thomas F. Theurkauf, an analyst at Keefe, Bruyette & Woods Inc., cut Fleets rating to outperform from buy and reduced his earnings estimate for the company next year by 15 cents, to $3.65 per share.
Increased competition for deposits, slower loan growth, and the need for stricter lending practices will make the environment tougher for banks in 2001, he says.
Fleet is doing everything they can to work through a difficult operating environment, Mr. Theurkauf wrote in a research note. While some nontraditional banking units are doing well, competition for deposits and slower loan growth will result in rather anemic revenue growth in domestic banking operations, he wrote.
Some analysts are optimistic about Fleets prospects. Christopher M. Mutascio, an analyst at Legg Mason Wood Walker, reiterated a strong buy rating Wednesday, a day after Fleet reported its third-quarter per-share earnings rose 13.5% from the same period last year, to 84 cents, in line with estimates.
Fleet said it had double-digit gains in revenues from brokerage and investment banking activities.
Mr. Mutascio said that, though Fleet lacks the size and breadth of a company like Citigroup Inc., it is better positioned than other regional banks. He has set a target price of $52 for the stock. Mr. Theurkaufs target price is $40.
Fleet saw its stock rise $1.50 Thursday to close at $35.1875 after selling for as low as $32.125 on Oct. 12.
Nancy Bush of Prudential Securities reiterated her strong buy rating for Fleet on Thursday, while Catherine Murray of J.P. Morgan & Co. reiterated a market performer rating.
We do not expect any significant positive near-term catalyst, even though the stock remains cheap and is trading at 9.8 times its expected earnings per share for this year, compared to 11.1 for the banking sector median, Ms. Murray said.
Mark Fitzgibbon, an analyst at Sandler ONeill & Partners, reiterated his buy rating for Fleet, whose per-share earnings beat Sandlers expectations by 2 cents.
While not all of the companys revenue engines were running on all eight cylinders in the quarter in aggregate, FleetBoston still managed to exceed our estimate with what we would consider to be solid earnings quality and deserves a higher price/earnings multiple, Mr. Fitzgibbon wrote in his research note.