Decent macroeconomic news and a high-profile Asian sell-off are fueling the bulls charging bank stocks today. Financial types love deals, so the market's rewarding the latest big one from Bank of America (BAC 4.98%). The company unloaded 2 billion shares -- only around 1% of the outstanding total, believe it or not -- in the enormous China Construction Bank.
The sale brought in roughly $1.5 billion, which is excellent considering B of A originally grabbed a 9% stake in the Chinese lender for $3 billion back in 2005. Ever since, it's slowly been selling off that holding. And not for a little money; in the latter half of 2011 alone, the company took in over $5 billion from CCB divestments.
Investors are rightly cheered by the gains B of A will book in this latest sale; the stock continues to outpace the Dow in the wake of the news. Stockholders are also likely encouraged by the bank's smart move in treating the CCB stake as a portfolio holding. That's a better play than using it as a strategic wedge to gain entry into the local financial market. After all, China, although potentially very lucrative, is a challenging and opaque environment at the best of times.
Investors like news of asset sales, and it seems shares of Citigroup (C 5.22%), with its large but shrinking Citi Holdings "distressed" assets unit, are benefiting from a knock-off effect from the B of A deal. Citi stock is also convincingly thumping the broader equity index today.
On the domestic front, this morning the Labor Department released data showing that the number of Americans applying for unemployment benefits dropped last week, to almost the lowest level since June 2008. That's providing a nice jolt to the broader market, and to the big banking names that populate the stock indices -- more wage earners, more potential borrowers, right?
Elsewhere in the macro sphere, in contrast to the previous week, mortgage rates have ticked up a bit. According to the latest Primary Mortgage Market Survey from Freddie Mac released today, the average for the 30-year fixed is 4.57%. This is six basis points ahead of the August 29 number and nearly twenty above that of August 15. That's not a scary climb, though, and what's more, it's part of a broader and expected upward trend. Home lending top dog Wells Fargo (WFC 5.74%) is well ahead of the Dow, and shares of No. 2 JPMorgan Chase (JPM 2.28%) aren't doing too badly either. Investors, it seems, aren't very nervous about that pop.
Speaking of JPMorgan, a Reuters report hitting the wires says the bank will cease providing student loans starting October 12. Citing an internal company memo as its source, the news agency wrote that the company has "concluded that competition from federal government programs limits its ability to expand the business."
So the bank is apparently retrenching and turning its focus to other, less competitive lending niches. That's certainly not a bad development. Now perhaps, like B of A, it can make the market even happier by finding a stock holding or two to sell for a chunky profit.
