NEW YORK (TheStreet) -- Stocks of large U.S. banks showed strength on Friday as disappointing economic reports shed light on the quandary facing the Federal Open Market Committee when it decides whether or not to curb the Federal Reserve's "QE3" bond purchases next week.
The KBW Bank Index (I:BKX) rose slightly to close at 63.68, with , with 15 out of 24 index components ending with gains.
Big banks seeing shares rise nearly 1% included JPMorgan Chase (JPM), with shares closing at $52.59, as investors shrugged off a Wall Street Journal report that the bank would add 5,000 employees to handle regulatory compliance and risk-management problems, and that related expenses and provisions for litigation reserves would total $4 billion during the second half of 2013.
Pulling Back on QE3As part of its third round of quantitative easing the Federal Reserve has been making monthly purchases of $40 billion in long-term mortgage-backed securities and $45 billion in long-term U.S. Treasury bonds since September of last year, in an attempt to hold long-term rates down. The FOMC at its next meeting September 17-18 is expected by many economists to begin a modest reduction of the central bank's monthly bond purchases, in light of comments by committee members over the past few months. The market has pushed the yield on 10-year U.S. Treasury bonds up to 2.89% from 1.70% at the end of April. The yield on the 10-year did decline by two basis points on Friday, mirroring the stock market's reaction to the disappointing economic reports.
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