The Curious Lethargy of Bank Stocks
This column was originally published on RealMoney on Jan. 9 at 12:00 p.m. EST. It's being republished as a bonus for TheStreet.com readers.
It's all about interest rates these days. A growing consensus that the Federal Reserve is almost done raising rates lit a fire under stocks last week, triggering a sharp rally to multiyear highs. Curiously, though, financial stocks didn't participate in this euphoric move. Curious indeed.
Over the holidays, I pointed out the Philadelphia banking index, or BKX, was sitting at multiyear resistance and looked ready to break out. It's odd that the index and its underlying components didn't break out during last week's powerful rally. After all, this particular sector should lead the charge in a favorable rate environment.
So there's reason for caution after last week's hot market. I don't want to overstate the case because the odds still favor a sector breakout. But this strange divergence should be watched closely. Bank stocks have another week or two to make their move. After that, gravity could take control and push them considerably lower.I've been tracking dozens of these stocks, looking for breakout opportunities in the weeks ahead. Unfortunately, the group still shows a mixed bag of leaders and laggards. Most of the big names aren't being accumulated with any conviction. Take Bank of America (BAC). The stock rallied from $41 to $47 when bullish chatter on interest rates began last autumn, but it topped out in November. It has been unable to move higher the last six weeks, despite the rally in the major indices. In the meantime, accumulation has rolled over in a series of lower highs. Like many banking stocks, Bank of America is sitting at strong resistance, trying to figure out what to do next. Perhaps investors are waiting for real news on interest rates, rather than frantic speculation driven by self-serving analysis. In any case, its chart presents a more cautious view on the outlook for interest rates. But one banking group isn't waiting for bullish rate news to move higher. Foreign banks listed on the New York Stock Exchange are rising strongly -- many are trading at multiyear peaks. It's depressing to admit the bright outlook moving these stocks, while American banks are stuck in the mud.
Here are the 10 strongest foreign bank stocks on the NYSE, listed by performance relative to their 200-day moving averages. Many of these issues look like they have more upside this year.
|Foreign Banks Trading Higher
|Unibanco Uniao De Bancos (UBB)||$71.96||140%|
|Bancolumbia Sa (CIB)||$30.62||130%|
|Banco Bradesco Sa (BBD)||$31.96||179%|
|Kookmin Bank (KB)||$77.93||106%|
|Shinhan Financial Group (SHG)||$86.40||96%|
|ICICI Bank (IBN)||$31.67||70%|
|Mitsubishi UFJ Financial Grp (MTU)||$13.99||40%|
|Banco Itau SA (ITU)||$27.00||86%|
|Banco Santander Chile (SAN)||$45.63||36%|
|Royal Bank of Canada (RY)||$78.55||54%|
|Source: Worden's TC2005|
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV