July 13, 2009 / 9:14 AM / 10 years ago

Wall St flies with banks after analyst's comments

NEW YORK (Reuters) - U.S. stocks rallied more than 2 percent on Monday as bullish comments on financial sector performance from analyst Meredith Whitney lifted hopes that banks’ quarterly results may be stronger than expected.

A man reads outside the New York Stock Exchange June 23, 2009. REUTERS/Eric Thayer

Light volumes made it easier for stocks to post such a big move, analysts said. The Dow industrials and the S&P 500, which had their best gains since June 1, rebounded sharply on Monday after registering weekly percentage drops for four straight weeks.

Whitney, who has in the past been bearish, also upgraded Goldman Sachs (GS.N) to a “buy” this morning, driving its stock up 5.3 percent to $149.44. The S&P Financial Index .GSPF, meanwhile, jumped 6.5 percent.

In comments to CNBC television, Whitney said bank shares were in for at least a short-term gain of 15 percent and that major financials, including Bank of America Corp (BAC.N) and JPMorgan Chase & Co (JPM.N), which along with Goldman are scheduled to report results this week, could do well in the second quarter.

Her comments offset concerns that CIT Group Inc (CIT.N), a lender to many small- and mid-sized businesses, was struggling to stay afloat.

The Goldman Sachs upgrade “kind of turned sentiment around short-term. It was enough to send the market up,” said Fred Dickson, market strategist at D.A. Davidson & Co in Lake Oswego, Oregon. “Basically, people are putting a little bit of money on the table ahead of ... earnings this week.”

Dickson also said the gains come on the heels of four straight weekly declines for the Dow and S&P 500, suggesting the market had become oversold.

The Dow Jones industrial average .DJI rose 185.16 points, or 2.27 percent, to end at 8,331.68. The Standard & Poor's 500 Index .SPX was up 21.92 points, or 2.49 percent, at 901.05. The Nasdaq Composite Index .IXIC was up 37.18 points, or 2.12 percent, at 1,793.21.

DELL FALLS LATE, BUT CSX JUMPS

After the closing bell, shares of Dell Inc DELL.O fell 4 percent to $12.50 after the computer company forecast lower gross margins for the July quarter. [ID:nN13208933] In regular trading, Dell closed on Nasdaq at $13.02, down 1.5 percent.

Shares of No. 3 U.S. railroad CSX Corp CSX.N rose after the bell, however, after it reported a stronger-than-expected quarterly profit. In extended-hours trading, CSX shares gained 6.1 percent to $34.54 from a New York Stock Exchange close at $32.54. During regular trading and before the release of the earnings report, CSX shares gained 1.6 percent.

This spring, stronger-than-expected first-quarter bank earnings prompted sharp gains in the sector’s stocks and helped fuel a rally of as much as 40 percent in the S&P 500 from March through May.

With second-quarter results, investors will be looking for evidence or upbeat comments from companies that suggest the U.S. economy is getting better.

In news that underscored the recession’s fallout, commercial lender CIT Group said late Sunday it remained in discussions with regulators on measures to improve its near-term liquidity. In addition, the Wall Street Journal reported the company had hired a law firm to explore a possible bankruptcy filing.

CIT shares fell 11.8 percent to $1.35.

Other companies expected to report results this week include General Electric (GE.N), International Business Machines (IBM.N), Intel Corp (INTC.O) and Johnson & Johnson (JNJ.N); all are Dow components. Citigroup (C.N), a former Dow component, is also set to report results later this week.

Shares of IBM, up 2.8 percent at $103.62, led the Dow higher, followed by JP Morgan, up 7.3 percent at $34.71.

Bank of America shot up 9.3 percent to $12.99.

Volume was on the light side on the New York Stock Exchange, with 1.19 billion shares changing hands, well below last year’s estimated daily average of 1.49 billion, while on the Nasdaq, about 1.95 billion shares traded, under last year’s daily average of 2.28 billion.

“We’re trading on marginal news on light volume,” said Brian Rauscher, director of portfolio strategy at Brown Brothers Harriman in New York. “The conviction is that everyone is straddling the fence right now.”

Advancing stocks outnumbered declining ones on the NYSE by a ratio of 5 to 1 and on the Nasdaq, by nearly 3 to 1.

Additional reporting by David Gaffen; Editing by Jan Paschal

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