Banks lead big morning rally

Small-cap stocks jumped higher this morning, buoyed by a rush back into bank and financial stocks amid hope that the government will set up a “bad bank” facility to mop up losing bank investments, which would help clear bank balance sheets. In addition, there is a sense that the Obama Administration is moving back toward the original purpose of the TARP of absorbing bad debt paper, a concept that has repeatedly sparked brief rallies in equities. At 9:52 a.m. ET, the Russell 2000 (NYSE:IWM) was up 9.15, or 2.01%, at 464.73.

Financial and bank stocks were the preferred outlet for bulls this morning. Huge percentage gains were seen for a vast array of banks; Citigroup Inc. (NYSE:C) was up 20% shortly after the open, while Wells Fargo & Co. (NYSE:WFC) was up 19%. The KBW Banking Index was up nearly 10%. Of course, it’s easier to generate jaw-dropping percentage gains on stocks that are only a fraction of where they were a year ago.

There is a chance that some of the enthusiasm on the financial and banking front has also been stoked by optimism ahead of this afternoon’s FOMC statement. With the Fed funds rate effectively near zero, one wouldn’t expect FOMC to carry much weight right now, but there is a chance that the Fed could talk up “non-traditional” means of providing liquidity and putting downside pressure on longer-term rates. The FOMC statement is slated for 2:15 p.m. ET.

The focus on banks and hope for quick action on bank balance sheets via troubled asset relief programs from the government might have diverted attention away from gloomy earnings for a bit, but even the earnings news today has some bright spots that are attracting attention. Over across the pond, business software maker SAP AG topped the earnings forecast and helped European shares move toward a . . .

For access to the full article, you must be a registered member - it's FREE.

Already a member? Please log in below