BOSTON ( TheStreet) -- Are big financial companies' stocks, many with double-digit gains this year, doing a dead-cat bounce or are they early on the path to steady recovery due to investors' renewed confidence in the beleaguered sector?
Maybe both, because financial services was the worst-performing industry last year, losing 18.4%, and banks and insurers had nowhere else to go but up.
But also because investors' fears about the European sovereign debt crisis and its potential impact on the already struggling global economy have waned, and they're finding banks, in particular the globe-spanning ones, super cheap.
The multi-faceted financial-services sector is up 8.6% this year, second only to the materials industry's 11% gain, while the S&P 500 has a rise of 4.7%. Eric Oja, a bank-industry analyst at S&P Capital IQ, said in an interview that he thinks the financials run this year "is a short-term rebound" coming off a bottom in October when investors feared an economic disaster as the European crisis was showing no progress. As a result, the sector's shares got pounded and the "worst-case scenario" got priced in. "Since then, there seems to be more clarity about what's going on in Europe," which has proved reassuring to investors, he said. In addition to that, fourth-quarter financial-industry results, although not great, were also a bit of a confidence builder for investors as most banks showed decent results and improvement in key capital ratios that indicate stability. Oja said he expects financial sector stocks may remain range bound over the near term given their big bounce recently. Indeed, Monday was a tough day for banks stocks, as the KBW Bank Index (I:BKX) was down over 1%, with 21 out of 24 index components showing declines for the session. That pared this year's big gains. Some of the largest share-price gainers this year were among the biggest losers last year. The best example of that is Bank of America (BAC - Get Report). Its shares are up 31% this year after losing 58% in 2011. Oja said that Bank of America was trading "at half of book value" late last year, "and that's a fire-sale price," so the company's fourth-quarter results may have many believing that the worst is behind it. Perhaps also giving investors more confidence were last week's comments from the Federal Reserve, which indicated, in essence, that it will remain active in trying to help the economy by letting businesses and consumers know they can continue to borrow cheaply over the next few years. The Fed said that it will probably keep interest rates low for the next three years and also provided an inflation target for the first time, and updated its economic projections. Here, then, are 10 financial stocks that have among the biggest turnarounds in share prices this year: