Banking stocks gained Wednesday for the third day in a row after several large companies reported better-than-expected second-quarter results.
The American Banker index of 225 bank stocks rose 4.7%, and the thrift index rose 0.93%. The Standard & Poor's 500 gained 1.86%, and the Dow Jones industrial average gained 2%.
Federal Reserve Chairman Ben Bernanke's testimony before Congress helped move the stock market higher; he said the country's economic slowdown would help inflation.
Neil Soss, chief economist at Credit Suisse Securities, wrote in a research note that he interpreted Mr. Bernanke's comments as an indication that the Federal Open Market Committee "is eager to pause" from raising interest rates.
Leading the pack in reporting strong results were JPMorgan Chase & Co. of New York and Bank of America Corp. of Charlotte. Each company reported earnings that beat the average estimate of analysts by 12 cents a share, according to Thomson Financial.
JPMorgan Chase and B of A relied on growth in credit cards, since retail banking dropped at both companies. (B of A bought MBNA Corp. in January.)
Shares of JPMorgan Chase rose 5.8%, and B of A rose 3.2%.
Taylor Capital Group Inc. of Rosemont, Ill., plummeted 13% after it reported earnings that fell 32% from a year earlier, to $6.3 million. The earnings fell short of estimates by 19 cents a share. The company blamed its net interest margin, which contracted 42 basis points from the first quarter, and declining fee income, among other things.
Hancock Holding Co.'s stock fell 4.5%. The Gulfport, Miss., company reported net income of $22 million, or 66 cents, which missed the average estimate by a penny.
Synovus Financial Corp. of Columbus, Ga., reported net income of $152.8 million, or 47 cents a share, which beat the average estimate by 2 cents. Its stock rose 5.8%.
SunTrust Banks Inc. of Atlanta and Bank of New York Co. Inc. reported earnings that beat the average estimate by a penny, despite compression in their net interest margins. SunTrust's stock rose 0.2%, and Bank of New York rose 7%.
Two Pittsburgh companies — PNC Financial Services Group Inc. and Mellon Financial Corp. — also beat expectations. PNC's net income of $1.28 a share beat the average estimate by 5 cents, and Mellon's net income of 55 cents a share beat the average estimate by 3 cents.
PNC's stock fell 0.7%, and Mellon rose 5%.
After the market closed Wednesday, Washington Mutual Inc. said it is selling a $140 billion mortgage servicing portfolio to Wells Fargo & Co. of San Francisco. Analysts said the sale is aimed at making Wamu more of a retail bank than mortgage company.
The Seattle thrift company also confirmed recent market rumors by saying it intends to sell WM Advisors Inc., which provides investment management, distribution, and shareholder services to the WM Group of Funds. That sale is expected to be completed this year, the company said.
Wamu reported second-quarter net income of $767 million, or 79 cents per diluted share, including an after-tax adjustment of $101 million to reflect the pending sale of $2.6 billion of mortgage servicing rights and an after-tax restructuring charge of $52 million related to efficiency initiatives.
Its shares rose 1.3% Wednesday.
Other gainers included West Bancorp. Inc. of West Des Moines, Iowa, which rose 6.9%, and Commerce Bancorp Inc. of Cherry Hill, N.J., which rose 6.1%.
The decliners included Hudson City Bancorp Inc. of Paramus, N.J., which fell 1.8%, and Prosperity Bancshares Inc. of Houston, which fell 1.6%.
