Bank stocks rebounded overnight on March 14. The Federal Reserve’s action guaranteeing demand deposits over $250,000 seems to have calmed the markets.
Some of the biggest losers were able to turn it around. First Republic (NYSE:FRC) was up 56%, taking back nearly one-third of its previous loss. Charles Schwab (NASDAQ:SCHW), which we wrote about yesterday, got back most of its Monday loss overnight.
The broader market was up nearly 1%, with Nasdaq stocks leading the way, up almost 1% as trading opened.
Buying the Banks
Investors wary of the snapback need to do their math. When a $100 stock falls 60%, it’s a $40 stock. When that stock then gains 50%, it’s a $60 stock. There is still work to do.
Among regional banks, KeyCorp (NYSE:KEY) was up 16% in pre-market trading but was still 19% below where it started the week. Western Alliance (NYSE:WAL) was up 40% to $36 per share but traded at $49 on Friday. Truist Financial (NYSE:TFC) was up 10% but still only halfway back to its Friday level. The same was true for Huntington Bancshares (NASDAQ:HBAN). Fifth Third Bank (NASDAQ:FITB), however, was within $1 of its pre-rout level.
The question traders were asking was whether the stocks would follow through on these gains once the market opened, repairing all the damage of Silicon Valley Bank’s collapse as fast as it happened. The Federal Reserve’s actions to stabilize the banking system were generally applauded (with a few exceptions). Many now believe another 25-basis-point rate hike this month is again in the cards.
If business remains stable, some of these banks were great bargains at Monday’s lows. Huntington, for instance, finished the day with a dividend yield of 4.5%.
Bank Stocks: What Happens Now?
Investors may also be buoyed by good news on inflation, which rose just 0.4% in February, to an annual rate of 6%. That’s below the 0.5% and 6.4% reported for January, but well above the Fed’s target rate of 4.5-4.75%.
I expect another .25% hike.
On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
