Banking stocks and the broader markets moved higher Thursday on signs that the Federal Reserve rate hike campaign that ended this summer has had the desired effect.
The Department of Labor reported Thursday that the core consumer price index in October rose 0.1%, slightly less than economists had expected. This "helped ease inflation fears," Peter E. Kretzmer, an economist at Banc of America Securities LLC, wrote in a research note.
"Today's release helps slightly to subdue the Fed's inflation concerns and solidify the Fed's 'on-hold' position," he wrote.
The American Banker index of 225 bank stocks rose 0.79%, and the thrift index gained 0.45%. The Standard & Poor's 500 climbed 0.23%. The Dow Jones industrial average added 0.44%.
Shares of Fremont General Corp. in Santa Monica, Calif., gained 1.6% after it announced that it would raise its fourth-quarter dividend by a penny a share from the third-quarter payout, to 12 cents. The dividend is to be paid Jan. 31 to shareholders as of Dec. 29.
Elsewhere, shares of Bank of New York Co. Inc. rose 1.4% after the company announced Thursday morning that Global Finance magazine had named it the best custody bank for the seventh straight year.
Shares of Sky Financial Group Inc. traded five times their average daily volume to close up 1.2%, a day after the Bowling Green, Ohio, company said it would restructure its balance sheet and had closed its deal for Wells River Bancorp Inc. in Wellsville, Ohio. Sky said the restructuring would cost the company $9.3 million, or 8 cents a share, in the fourth quarter.
Other gainers included Rockville Financial Inc. in Connecticut, which rose 9.6% after it announced a second dividend payment -- 4 cents a share to be paid Nov. 30 to shareholders as of Nov. 20 -- since going public in June 2005. Charter Financial Corp. in West Point, Ga., was up 4.1%, and Centennial Bank Holdings Inc. in Denver, 3.6%.
Among the decliners was Doral Financial Corp. in San Juan, Puerto Rico, which slid 1.5%.
Doral said late Wednesday that it had hired the New York investment banks Bear Stearns & Cos. Inc. and JPMorgan Chase & Co. to help the company restructure its balance sheet and refinance $625 million of bonds that mature in July 2007.
Shares of Placer Sierra Bancshares in Sacramento, Calif., were among the biggest losers in the sector, after a Securities and Exchange Commission filing in which it said its largest deposit customer, a national mortgage servicer, plans to withdraw all of its balances before June 2007. The unnamed client supplied about 13% of Placer Sierra's total deposits at Sept. 30, and 30.2% of its non-interest-bearing deposits.
The bank's shares fell as much as 10.2% in early trading but rebounded by the close to a 5.6% loss.
Other decliners included Capital One Financial Corp. in McLean, Va., down 1.9%; Cascade Bancorp in Bend, Ore., off 1.5%; and Corus Bankshares Inc. in Chicago, 3.6% (partly offsetting its gains of 13.4% Wednesday and 6.9% Tuesday).
