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US bank stocks continue to rally Wednesday

US bank stocks continue to rally Wednesday

Financial firms continued to rally Wednesday amid hope for additional government support and as an analyst upgraded two major banks.
Wednesday's rally comes a day after banks surged. On Tuesday, Citigroup's chief executive said the beleaguered bank operated at a profit in January and February.
The KBW Bank Index, which tracks 24 of the biggest U.S. banks, jumped more than 3 percent to 23.77 in morning trading Wednesday. The index surged nearly 16 percent Tuesday after Citi's CEO Vikram Pandit disclosed the bank's quarterly progress.
The New York-based bank, which has been among the hardest hit during the ongoing market turmoil, said it is performing at its best pace since the middle of 2007 _ the last time the bank turned a quarterly net profit.
Citi shares jumped 16 cents, or 11 percent, to $1.61 Wednesday, a day after gaining more than 38 percent.
Positive news in the banking sector has been welcome relief for a sector that has been battered in recent weeks amid continuing uncertainty about the ultimate losses financial firms will take amid the ongoing credit crunch and recession. Investors have also been eagerly awaiting specific details from the government about how it intends to provide additional support to help the struggling sector.
Fox-Pitt Kelton analyst Adam Klauber said the government has signaled in recent days it might relax accounting rules that have forced banks to takes hundreds of billions of dollars in write-downs since the middle of 2007. Those write-downs required them to find ways to raise capital in an inhospitable market. Current stress tests the government is running to determine how major banks would fare among even worse economic conditions are also likely to be passed by the banks in the coming weeks, which should bolster the sector, Klauber wrote in a research note.
Klauber noted the banking sector could be getting a boost amid short covering, which occurs when investors need to buy stock to replace shares that were borrowed and then sold on expectations of a market decline.
Banks are also rallying as Goldman Sachs Group Inc. upgraded ratings on major banks Morgan Stanley and U.S. Bancorp.
Analyst Richard Ramsden upgraded Morgan Stanley to "Buy" from "Neutral," noting the bank is in a strong position to outperform its competitors because of a strong capital base and due to its reasonable valuation. In a research note, Ramsden said the majority of Morgan Stanley's balance sheet accurately reflects current valuations of investments, so further write-downs might not be as bad as at other banks.
Ramsden increased his price target to $27 from $21. Shares of Morgan Stanley jumped $2.17, or 10.4 percent, to $23.01.
Shares of Goldman Sachs, which like Morgan Stanley converted from a stand-alone investment bank to a more traditional commercial bank structure, also jumped. Goldman shares rose $6.38, or 7.5 percent, to $91.66.
Ramsden also upgraded U.S. Bancorp, lifting his rating on the stock to "Neutral" from "Sell." The stock was also removed from the "Americas Conviction Sell List."
The upgrade is based on the current valuation of the stock, as Ramsden noted its share prices have tumbled to a level more in line with his view on the bank.
Shares of U.S. Bancorp jumped 92 cents, or 8.1 percent, to $12.32.
Among other large, national banks, shares of Bank of America Corp. jumped 48 cents, or 10 percent, to $5.27. Wells Fargo & Co. shares rose 44 cents, or 3.7 percent, to $12.25.
One of the few decliners on the day in the sector was American Express Co. Earlier in the day, Goldman analyst Brian Foran cut his view on the credit card lender. Foran added American Express to a special sell list, warning that the lender is likely to see a continued rise in losses as more customers fail to make payments on their loans.
Foran set a price target of $7.50 for American Express. Shares of New York-based American Express fell 52 cents, or 4.3 percent, to $11.65.


Updated : 2021-06-16 22:23 GMT+08:00