Today's rally on the Street was recently lifting most of the major indices, and wading high in the green were the banks and brokerages.
Philadelphia Stock Exchange/KBW Bank Index
was lately up 5.1% while the
Nasdaq Financial 100
gained 4%. The
American Stock Exchange Securities Broker/Dealer Index
was also rising, lately higher by 3.3%. Refreshing, indeed, given that the financial sector has been having a rough-and-tumble time amid a downturn in investing activity and diminishing market confidence.
, which derives more than 35% of its revenue from trading commissions, announced
some job cuts and a first-quarter earnings warning, which dragged the brokerage sector lower. The day before, financial behemoths
Morgan Stanley Dean Witter
reported slumping profits, citing the downturn in the equity market. But the stocks were faring well today, as Schwab recently gained 5% to $15.95 while Lehman Brothers upped 3%. Morgan Stanley rose 0.4% and Bear Stearns recently gained 2%.
But today's gains, like yesterday's losses, seem to be due to the volatile bouts the market has experienced of late. "There were a lot of sellers yesterday, but people bought them up today," said Patrick Boyle, head financial trader of
Credit Suisse First Boston
. Commenting on the wind of change felt by the financial sector today, Boyle said he sees "no particular reason" for the uplift, and that it was "just a momentum-driven rally."
Peyton Green, managing director of
Stern, Agee & Leech
, agrees: "We've seen bank stocks hold up well until last Friday, when bank stocks started to trade down. Before that they were a kind of a safe haven as people rotated out of tech into bank stocks, but the move today is not really representative. It's just money flowing into the market."
Green attributed the recent downward pressure on financials to the overall worry about the market downturn, which sent some people running to take profits. Nevertheless, he retains a long-term optimism on banks, especially on some small commercial banks, which he believes are "appropriately valued," if not "a little cheap."
Shrugging off the recent profit-taking within the sector, Green said that the sector should do well in the long term with the Fed continuing to ease. "The great wind in our back is lower interest rates," he said.