This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Citi Leads Banks' Snow-Day Bounce-Back

Stock quotes in this article: C, STT, I:BKX

NEW YORK (TheStreet) -- Citigroup (C) and State Street (STT) were the winners among large-cap banks on Friday, with shares of both companies rising over 2%, as the sector rebounded from Thursday's losses.

As the Northeastern U.S. dug out from under a heavy snowfall, shares of Citigroup closed at $53.39, while State Street of Boston closed at $74.76.

The broad indices ended mixed, after Federal Reserve Bank of Philadelphia president Charles Plosser warned Friday that the central bank might have to be aggressive in lifting interest rates if banks were to quickly release reserves.  According to Plosser, the Federal Reserve has often been late in tightening interest rate following periods of monetary stimulus.

The Federal Open Market Committee last month announced the Federal Reserve would taper its "QE3" purchases of long-term bonds to $75 billion a month from the monthly purchases of $85 billion it had been conducting since September 2012.   The market's anticipation of the tapering pushed the yield on 10-Year U.S. Treasury bonds to 2.99% from 1.70% at the end of April.

Leading into the U.S. Senate's confirmation vote on Janet Yellen's nomination to succeed him, outgoing Federal Reserve chairman Ben Bernanke in a speech emphasized the central bank's increased "transparency and accountability," during his tenure, which the FOMC's outline of its long-term goals in January 2012.  He also said that the economic recover in the United States "has faced powerful headwinds, suggesting that economic growth might well have been considerably weaker, or even negative, without substantial monetary policy support. For the most part, research supports the conclusion that the combination of forward guidance and large-scale asset purchases has helped promote the recovery."

In addition to the bond purchases that have been meant to hold down long-term interest rates, the Fed has kept the short-term federal funds rate in a target range of zero to 0.25% since late 2008.  The FOMC has repeatedly said it would be unlikely to raise the federal funds rate until the U.S. unemployment rate drops below 6.5%.  The unemployment rate during November was 7.0%, improving from 7.0% in December.

Bernanke said that in addition to the inevitable asset sales following the Fed's massive balance sheet expansion, the central bank had other tools it could use to raise short-term rates when appropriate.  "The interest rate on [banks'] excess reserves [deposited at the Fed] can be raised, which will put upward pressure on short-term rates; in addition, the Federal Reserve will be able to employ other tools, such as fixed-rate overnight reverse repurchase agreements, term deposits, or term repurchase agreements, to drain bank reserves and tighten its control over money market rates if this proves necessary," Bernanke said.

The point of all that will be for the Federal Open Market Committee to move beyond the extended period of taking extraordinary measures to jump-start the sluggish economy in the wake of the housing crisis, and "return to conducting monetary policy primarily through adjustments in the short-term policy rate."

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

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.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,898.57 -144.33 -0.85%
S&P 500 1,957.12 -15.17 -0.77%
NASDAQ 4,447.4270 -45.9630 -1.02%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs