Bank stocks rose with the broader market Wednesday as Federal Reserve Board Chairman Ben S. Bernanke said inflation fell in recent months.
“Inflation pressures appear to have abated somewhat following a run-up during the first half of 2006,” Mr. Bernanke said in his semiannual monetary policy report to Congress. “Nevertheless, the core inflation rate remains somewhat elevated.”
The Fed remains on alert, he said, referring to the last statement of the Federal Open Market Committee last month.
The market took his remarks as good news, despite data from the Commerce Department showing that January retail sales were virtually unchanged from the previous month but rose 2.3% from a year earlier. Business inventories for December were also virtually unchanged from a month earlier, but rose 6% from a year earlier, the department said.
Gary Bigg, a Banc of America Securities LLC economist, wrote in a research note that the figures might “imply a downward revision” of fourth-quarter gross domestic product growth, to between 2.75% and 3%, from the previously reported rate of 3.5%.
Bank stocks did not outperform the market, but gains among large banking stocks were better than the group’s overall lift. The American Banker index of 225 banks rose 0.3%. The index of banks in the Standard & Poor’s 500 rose 0.6%, while the Nasdaq bank index fell 0.1%. The S&P 500 itself rose 0.8%, and the Nasdaq composite climbed 1.2%.
Ameris Bancorp of Moultrie, Ga., and City Holding Co. of Charleston, W.Va., were among the day’s biggest losers among financial services stocks. Ameris fell 2.1%, while City Holding fell 2%.
But New Century Financial Corp. of Irvine, Calif., rose 6.2%, recovering from a steep fall last week related to subprime lending fears.
Others specialty lenders also rose, including Allied Capital Corp. of Washington, which climbed 3.9%.
Accredited Home Lenders Holding Co., rose 1.6% Wednesday, even though the San Diego home builder reported a loss for the fourth quarter and said it would not issue earnings guidance for this year, because there are so many uncertainties in the subprime mortgage business.
Accredited posted a fourth-quarter net loss of $37.8 million, or $1.49 a share, compared with a profit of $155.4 million, or $7.07 a share, a year earlier. It blamed lower gain-on-sale premiums on the loans it sold, as well as higher repurchase provisions and lower spreads.
Meanwhile, Standard & Poor’s Corp. lifted its credit ratings for six large banking companies it had put on review for a potential upgrade in September.
“There have been huge structural changes in the industry,” Tanya Azarchs, an S&P analyst, said during a conference call. “It’s taken a while for them to show through. What we’ve seen that despite the revenue pressures, you have record profitability.”
S&P upgraded the counterparty credit ratings for Wells Fargo & Co. to AA-plus, from AA. Bank of America Corp., Citigroup Inc., and U.S. Bancorp were raised to AA, from AA-minus, and JPMorgan Chase & Co. and Wachovia Corp. were raised to AA-minus, from A-plus.
The ratings agency also upgraded Wells’ banking subsidiary to AAA, from AA-plus. The top rating was S&P’s first for a bank since 1998. (Moody’s Investors Service Corp. had upgraded Wells Fargo Bank to Aaa in 2003 and Citibank to that grade last year.)
“Being the only U.S. bank to have the highest credit rating from both S&P and Moody’s is further proof of the long-term value of our time-tested vision, business model, conservative risk management and the ability of our talented team to satisfy all of our customers’ financial needs and help them succeed financially,” said Richard M. Kovacevich, Wells Fargo & Co.’s chairman and chief executive officer.
Citigroup also weighed in. “This is yet another strong endorsement of our accomplishments, strategic direction and powerful advantages,” Charles Prince, its chairman and CEO, wrote in a memo to staff Wednesday.
Citi’s shares rose 0.9%, and Wells climbed 0.4%.
