US stocks soar on renewed hope for banks
It's been a long time – a really long time – since there's been good news about a bank.
So when Wells Fargo announced Thursday that it expected a record $3 billion profit in the first quarter, the stock market soared.
The Dow Jones Industrial Average jumped 246 points, recrossing the 8,000 barrier to close at 8,083.38, its highest level since Feb. 9. Bank stocks did even better. Wells Fargo saw its stock jump 31.7 percent. JPMorgan Chase was up 19.4. Bank of America soared 35.3 percent.
Even battered Citigroup benefited with a 12.6 percent increase in its stock price.
Not out of the woods
If the financial sector led us into this mess, does today's strong showing mean that they're about to lead us out?
Not so fast. There are still those toxic assets to deal with. Today's rosy outlook for Wells Fargo may have more to do with positive trends in housing and the bank's home-lending portfolio than in a sudden turnaround for banks in general.
In a word, home-lending is soaring as owners and buyers flock to lending institutions to take advantage of low mortgage rates. At a time when they're getting money from the Federal Reserve virtually free – and have fewer competitors in the mortgage business – banks can make a bundle with new home loans. (Did Wells Fargo lend more or less than it got in federal bailout money? Click here.)
The wild card, of course, is what to do with all those old home loans. With warnings that more foreclosures lie ahead, many analysts are cautious.
Those toxic loans still burden the banks. Thursday's positive move just helps lighten it a little bit.
The other key stock indexes moved up as well. The S&P 500 index was up 3.8 percent to close at 856.56. The tech-heavy Nasdaq soared to its highest close of the year – 1,652.54.