Banking Stocks – Is It Too Late to Buy?
Banking Stocks – Is It Too Late to Buy?
I wrote a posting on May 3rd, 2009 title “Will Stocks Market Rebound Soon?” And the answer surely it did for the past one week where Dow Jones rose more than 200 points, Citigroup rose to $4.02 from $3.14 (28% higher) and Bank of America rose to $14.17 from $8.68 (63% higher). This is a solid rise as the market seems to be bottoming up thus start to reverse for the past few weeks. The trend seems confirming as the positive financial news released were adding investors’ confident.
The bank stress test was out this week and 10 of the 19 largest U.S. banks will need to raise about $75 billion in new capital as a buffer against losses if the economy worsens. Some investors feared the test results would show the big banks needed much more capital.
The market has been on an upward swing since early March, rising more than 25 percent from 12-year lows on good news about business at banks and an increasing amount of improving economic data on housing, manufacturing and other key sectors of the economy.
Even the shabby labor market has been showing signs of moderation. On Thursday, the government said new applications for unemployment benefits fell unpredictably last week to the lowest level in 14 weeks. That data followed a better-than-expected private snapshot of the labor market on Wednesday.
On Thursday, the Dow ended down 102 points, erasing the previous day’s gains as investors locked in profits ahead of the stress test results. With Thursday’s loss, the index is down 4.2 percent for the year. Broader indexes also declined.
Financial stocks, which have largely led the market’s spring rally, were mostly higher in pre-market trading.
It was a clear trend that the financial market has found its bottom on March and since then the broader indexes has rebounded more than 20%. The financial data released were on the positive side coupled with the government stimulus package, which is driving the economy out of recession. The crude oil is at it low point where it add up an incentive for revival especially in the shipping and transportation sectors.
The biggest different of this recession with the past ones is that almost all the nations are taking its parts into reviving their own country’s economy by cutting interest rates and introduce stimulus packages to drive the economy forward. This collaboration was never seen in our world history as I believe the nations’ governments are better prepared today. Nevertheless, the US government and the policy makers should learn a great lesson in this downturn as I believe they will be more prudent now and in the future.
June 10th, 2009 at 8:26 am
[...] 10 needed to raise $75 billion more to protect against future losses. All of those banks, including Citigroup Inc. and Bank of America Corp., had submitted plans by late Monday to bolster their capital cushions [...]