Bank stocks jumped Tuesday on positive earnings announcements and upbeat economic news pointing to moderate inflation.
Shares of First Union Corp. rose $1.8125, to $64.8125; J.P. Morgan & Co. gained $7.5365, to $133.5365; and Norwest Corp. was up $1.25, to $39.375, as fee income advances enabled the institutions to meet or beat analysts' income expectations.
Declining to discriminate, the market also boosted shares of companies that will report later this week or next. Chase Manhattan Corp. added $1.125, to $79.50; Citicorp, $2.5625, to $176.8125; and Wells Fargo & Co., which had been losing ground in recent days, $12.875, to $392.9375.
"It's money, money, money" pouring into the market, and banks are one of the chief beneficiaries, said John L. Manley, equity strategist at Salomon Smith Barney.
Investors were cheered that the best-known inflation measure, the consumer price index, crept up just 0.1% in June over May, less than expected, and that second-quarter earnings remain good.
"The feeling is that the solid earnings performance will continue," said Don J. Kauth, banking analyst at BT Alex. Brown.
But the surge was mostly for large banks, as smaller institutions, already bid up on takeover expectations, had a mixed day.
The Standard & Poor's bank index added 1.82%, and the Dow Jones industrial average increased 1.64%. The Nasdaq bank index increased 0.18% and the S&P 500 was up 1.06%.
Earnings were not the only story on Tuesday. Shares of Northern Trust Corp. added 50 cents, to $81.50, after analyst Nancy A. Bush of Ryan, Beck & Co., initiated coverage with a "buy" rating.
Calling shares of the Chicago company "the highest quality bank stock we can imagine," Ms. Bush cited strong growth prospects and low risks on credit quality and acquisitions.
Shares should hit $98 over the next 12 months, as Northern Trust builds upon its base of corporate and personal trust services, both of which serve as fee income engines, Ms. Bush said. "In an era when customer service at banks seems to be an old-fashioned concept, this is one company that happily and profitably bucks that trend."
In other action, shares of Bank of New York Co. rose $2.3125, to $66.50, after it announced a two-for-one stock split. The move, effective Aug. 13, will boost outstanding shares to 748 million.
Brokerage stocks were the day's big losers, falling back after a two-day run-up on merger speculations.
Donaldson, Lufkin & Jenrette dropped $1.5625, to $61.50; Lehman Brothers, $1.0625, to $83.9375; and Merrill Lynch & Co., $2.625, to $105.3125.