State Street Leads as Bank Stocks Investors Look to Wednesday

NEW YORK (TheStreet) -- State Street (STT) was the winner among large-cap bank stocks on a rather weak Monday for the sector, with shares rising more than 2% to close at $70.22.

The Dow Jones Industrial Average was down 0.2%, while the S&P 500 pulled back 0.5% and the NASDAQ Composite ended with a 1.2% decline, as investors reacted to disappointing U.S. and China manufacturing data, and biotech stocks showed weakness. The KBW Bank Index (I:BKX) was down 0.1% slightly to 72.63%, with all but eight of the index components ending with declines.

Following the completion of the first part of its annual bank stress tests on Thursday, the Federal Reserve at 4 p.m. ET Wednesday will announce the results of its Comprehensive Capital Analysis and Review (CCAR), which applies large banks' plans to deploy excess capital to another round of stress tests.

CCAR has become something of an annual party for investors, since most of the banks subject to the stress tests are expected to announce plans for dividend increases and share buybacks following the tests.

State Street of Boston and Discover Financial Services DFS are the only banks subjected to this year's stress tests that have been able to lower their count of outstanding common shares by 5% over each of the past two years.

Discover's shares rose slightly Monday to close at $57.84.

KBW analyst Robert Lee estimates State Street will receive Federal Reserve approval for $2.026 billion in common-share buybacks from the second quarter of 2014 through the first quarter of 2015, and also estimates that the bank's net buybacks will come to $1.676 billion, after factoring in stock issuance for share buybacks.

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