Bank Stocks React Poorly to the T-Word

Everyone knows it'll come to an end; they're just not happy the party will soon be over. "It" is the Fed's current round of quantitative easing, which for a while now has very effectively supported the bond market, particularly that for mortgage-backed securities. Tapering now looks like it'll happen sooner and stronger rather than later or weaker, considering today's macro data -- the closely watched number of initial jobless claims fell to its lowest mark in years, handily beating market estimates. The Fed has intimated that it'll start tapering once the economy shows definite signs of improvement, and those better labor figures are the size of billboards.

Nobody really wants to finish their drinks and go home. That Fed money is supporting a lot of players in the financial industry generally, and the debt markets specifically, not least the nation's big lenders. As with the broader Dow today, they're all getting punished for the good news.

But some less so than others. Case in point, Wells Fargo (NYSE: WFC  ) . Yes, tapering will likely affect its operations and results, as its still far and above the nation's top mortgage lender. But the segment still has plenty of room to run, if today's data from Freddie Mac is any harbinger. Fred said today that its weekly Primary Mortgage Market Survey showed rates that were essentially unchanged from the previous week. In other words, they're stable and continuing to tease all-time lows -- the current 4.40% on the 30-year fixed is a mere 1.1 percentage points above the floor set last November. This means potential home buyers still have plenty of opportunity to nab cheap mortgages, which the Wells Fargos of the market will be only too happy to provide.

Also helping support the bank's stock price is the latest peek into the portfolio of Warren Buffett's Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) . Regulatory filings revealed that in Q2, the wise owl of the investing world added to Berkshire's already massive Wells Fargo stake, upping its holding by a little over 1% to around 463 million shares. Warren remains confident enough to keep plowing cash into the company, a habit that's comforting the market.

There isn't much news from the other banking majors to offset today's QE-related bearish developments. Bank of America's (NYSE: BAC  ) investment bank workhorse Merrill Lynch is doing a little business related to the latest high-profile buyout on the market. This is Paulson & Co.'s roughly $512 million acquisition of Steinway Musical Instruments (NYSE: LVB  ) for which Merrill, along with Deutsche Bank, is providing debt financing.

JPMorgan Chase (NYSE: JPM  ) hasn't been hit with any new lawsuits today. At least, not yet. The government's probably satisfied now that it's hauling two of the bank's traders into court for their part in the London Whale scandal, as it announced yesterday. These days, it seems the company can't go for more than a week without getting slapped by a lawsuit or becoming the target of some kind of government investigation.

Hopefully for Morgan investors, that kind of pressure will abate along with QE if and when the fallout from recent scandals slows. That's the kind of tapering the big banks -- and the market in general -- could get enthusiastic about.

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