Banks Gain on Jobs Data: Financial Winners
The Dow Jones Industrial Average (^DJI) rose 0.5% while the other broad indexes showed smaller gains after the Bureau of Labor Statistics said that nonfarm payrolls rose by 155,000 in December, down from an upwardly revised 161,000 in November. Economists, on average, were expecting nonfarm payrolls to increase by 150,000 in December, according to Briefing.com.
Private nonfarm payrolls increased by 168,000 in December, declining from an upwardly revised 171,000 the previous month, but coming in significantly higher than the 148,000 was estimated by economists.
The national unemployment rate was unchanged at 7.8% after the November figure was revised from 7.7%.
The government's December employment figures were much lower than those reported by Automatic Data Processing on Thursday. ADP said that the U.S. economy added 215,000 nonfarm private sector jobs during December, UBS economist Maury Harris said in a note early Thursday that "the Dec estimates can be fluky," as the company's December employment estimates were significantly higher than the governments during the preceding two years. "If firms laid off fewer people in 2012 than in 2011 (and fewer in 2011 than 2010), their end-of-year reconciliations of their payroll records can result in a falsely high ADP estimate," he said.
Also on Friday, the Institute for Supply Management said that its ISM services index "registered 56.1 percent in December, 1.4 percentage points higher than the 54.7 percent registered in November. This indicates continued growth at a slightly faster rate in the non-manufacturing sector." Economists on average expected a reading of 54.2. The ISM Employment Index "increased by 6 percentage points to 56.3 percent, indicating growth in employment for the fifth consecutive month at a significantly faster rate."
The KBW Bank Index (I:BKX) rose 2% to close at 53.73, with 23 of the 24 index components showing gains of at least 1%, except for New York Community Bancorp (NYCB) , which was down 1% to close at $13.34.
New York Community pays out 25 cents a share per quarter, for a dividend yield of 7.50%, which is among the highest yields on common shares in the industry. The company has maintained the dividend for 35 consecutive quarters, although the dividend payout is quite high, considering that the company's quarterly earnings have ranged between 27 cents and 30 cents a share over the past year.
Large-cap banks seeing shares rise 3% included Morgan Stanley (MS) , which closed at $20.19; Bank of New York Mellon (BK) , at $27.29; Comerica (CMA) , closing at $37.13; Northern Trust (NTRS) , at $53.47; SunTrust (STI) , at $29.42; and State Street (STT) , which closed at $49.39.
Shares of Citigroup (C) rose 2.5% to close at $42.43, after Deutsche Bank analyst Matt O'Connor reiterated his "Buy" rating for the bank company and raised his price target for the shares to $46 from $40.