The bank stock bandwagon kept rolling Wednesday, as investors snapped up the shares while confidently awaiting the next round of major news on the economy.
The Standard & Poor's bank index set another high, climbing 0.46%. That index kept pace with the Dow Jones industrial average, which gained 0.49% after it hitting a new high of its own Tuesday. New highs were also reached by the Nasdaq bank index, up 0.87% and the S&P 500, which gained 0.72%.
Among the banks, BankAmerica Corp. was up $1 to $84; NationsBank Corp., $1 to $87.375; Synovus Financial, $1.375 to $29, and U.S. Trust Corp., up $2.75 to $61.
"The bank group has really exploded in the last week or so," said analyst Frank J. Barkocy of Josephthal, Lyon & Ross Inc.
Nasdaq banks were especially robust because of the passing of the saving and loan insurance legislation on Tuesday.
Not surprisingly, that sparked a rally in thrift issues. big gainers included Charter One Financial Inc., Cleveland, up $2 to $41.75; Washington Mutual Inc., Seattle, up $1.625 to $38.625; and Peoples Bancorp Audubon, in Indiana, up 75 cents to $20.
Economist Scott J. Brown of Raymond James & Associates, St. Petersburg, Fla., expects further strength in stocks, but detects "some investor nervousness" in advance of Friday's job market report. The monthly government reports have roiled markets since last winter.
Most economists anticipate good news, from Wall Street's point of view. The nation's jobless rate may well "blip up" from its artifically low 5.1% August level, Mr. Brown said. Meanwhile, the increase in the nonfarm payroll is expected to be between 150,000 and 200,000, down from 235,000 in August.
Mr. Brown says he doesn't think the Fed will raise rates again this year. Other economists strongly disagree, asserting that inflation is being rekindled by tight labor markets.
The division of opinion has kept financial markets on edge, and that has benefited bank stocks, according to analyst Robert B. Albertson of Goldman, Sachs & Co.
"The investor looks at divergent economic statistics, can't conclude how the economy is really looking, and searches for a safe haven until the confusion is cleared," he said.
He said banks have appealed to portfolio managers, hence their six-week rally. But Mr. Albertson cautioned that earnings momentum is slowing for banks. From 14% year-to-year growth per share in the second quarter, he feels momentum has slowed to 10.8% growth in the third quarter.
Frank Betz of Carret & Co., the investment management firm, noted that investors can find both "defensive and growth opportunities" in smaller regional banks. "Very few banks sell for more than two times book value and a lot sell for less," he said "that gives us a feeling of comfort in markets that are pushing the limit like this one."