--Financial stocks climb on mix of positive news; Treasury
yields climb
--Moody's upgrades U.S. banking system
--Steeper yield curve helps banks earnings prospects, strategist
says
(Adds closing stock price throughout.)
By Brett Philbin
Financial stocks rose across the board Tuesday, leading the
broader market higher, amid encouraging economic data and a key
upgrade of the U.S. banking system, while Treasury yields climbed
to their highest level in more than a year.
Financials were one of the biggest gainers in the Standard &
Poor's 500-stock index, with the sector advancing 1%. The increase
was part of a market rally as stocks posted their fifth
triple-digit gain this month and hit another record high.
The NYSE Arca Broker/Dealer Index, a grouping of securities firm
stocks, climbed 2.4%, while the Keefe, Bruyette & Woods Bank
Index, a collection of major bank stocks, rose 1.3%.
"It's part of the overall bullish tone," of the market, said
Steve Sosnick, an equity risk manager at Timber Hill, the
market-making unit of Interactive Brokers Group Inc. (IBKR).
Big banks, securities firms, and online brokerages moved higher
as investors applauded a mix of positive news. Earlier Tuesday, the
Standard & Poor's Case-Shiller index showed that home prices
posted their largest annual gain in more than seven years--a
welcome data point for banks, both in terms of potential revenue
growth from their mortgage businesses as well as fewer loan losses
from underwater home owners.
In other good news for banking, Moody's Investors Service has
raised its outlook on the U.S. banking system to stable from
negative--its first positive outlook revision for the sector since
2008. Moody's says the Federal Reserve's low-interest-rate policy
could help drive growth in private-sector employment and support
real-estate values.
Meanwhile, U.S. Treasurys fell, pushing the yield on the
benchmark 10-year note up to 2.17%. Brokerages and banks have been
crimped by low rates for more than four years, which have hurt the
profitability of their investing and lending businesses and forced
firms to waive fees on their money-market funds.
"There is nothing investors welcome more in terms of earnings
prospects for financial names than a steeper yield curve," Andrew
Wilkinson, chief economic strategist at Miller Tabak & Co. LLC,
said in a note to clients.
Among financial stocks which closed higher were TD Ameritrade
Holding Corp. (AMTD), which rose 5.6% to $23.65, earlier reaching
its highest price since September 2008, while Charles Schwab Corp.
(SCHW) finished up 3.2% to $19.77, earlier rising to its own
highest level since October 2009. Rival online brokerage E*Trade
Financial Corp. (ETFC) closed up 4% at $11.78, earlier setting a
new 52-week high.
Those companies that hold customer balances are the ones that
would "show an immediate bottom-line benefit to higher interest
rates," Mr. Sosnick said.
Several big banks also rose Tuesday, including Morgan Stanley
(MS), which climbed 1.6% to $24.73, while Goldman Sachs Group Inc.
(GS) gained 1.6% to $160.70. Commercial banking giant Citigroup
Inc. (C) closed up 2.5% to $51.79, while regional brokerage Stifel
Financial Corp. (SF) and trust bank State Street Corp. (STT)
climbed 5.3% and 4.1%, respectively.
-Matthias Rieker contributed to this report
Write to Brett Philbin at brett.philbin@dowjones.com