Market Overview

Among the Stars of the November Rally: Bank Stocks

Almost by stealth, there's a group of stocks that have put up strong numbers in November and for the year -- even while many people profess to, well, hate them. We're talking banks.

Big banks are doing splendidly. Regional banks are doing even better. If interest rates start to rise -- a question of when, not if -- bank and financial services stocks should do even better. Plus, the regional banks are lovely takeover candidates.

In other words, if banks stocks do well in the coming months, they will give support to the stock market rally.

The winners so far include JPMorgan Chase (NYSE: JPM), which is the top performer in the Dow Jones Industrial Average, up 11.5 percent for the month.

That gain may be surprising, given the attention the banking giant has received of late. In 2012, it took a $6 billion loss from its trading operation in London. And it agreed this month to pay $13 billion -- half its annual profit -- to settle lawsuits over what The New York Times called "the bank’s questionable mortgage practices before the financial crisis."

And yet, there it is: The stock has been a winner.

Also in the list: Bank of America (NYSE: BAC), up 13.31 percent; Citigroup (NYSE: C), up 8.8 percent; U.S. Bancorp (NYSE: USB), up 5.33 percent; and Texas Capital Bancshares (NASDAQ: TCBI) up 8.18 percent.

The Financial Select Sector SPDR (NYSE: XLF) exchange-traded fund is up 4.86%, tops among ETFs that mimic the sectors of the S&P 500. The SPDR S&P Regional Banking ETF (NYSE: KRE) is up 7.1 percent this month.

By comparison, the Dow is up 3.55 percent in November; the Standard & Poor's 500 Index has risen 2.89 percent; and the Nasdaq Composite Index has grown 3.2 percent.

Bank stocks rose sharply at the start of the year, then stalled after Federal Reserve Chairman Ben Bernanke suggested the Fed might taper its $85-billion-a-month bond-buying program. The rally found new life when it became clear the Fed wasn't going to make any hasty moves in 2013.

One other factor may be playing a role in the gains: Momentum stocks started to sell off in a big way, and the cash realized from the sales of, say, Tesla Motors (NASDAQ: TSLA) had to go somewhere. Banks seem to be a beneficiary.

If you're thinking of getting into the group, be selective. It has been a solid winner all year, and the shares may be a bit rich. The relative strength indexes of many of the stocks are above 70, which is a clear signal that short-term top is nearing.

Posted-In: Bonds Economics Federal Reserve Pre-Market Outlook After-Hours Center Markets Best of Benzinga

 

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