It's a good day to be invested in stocks, what with the Dow crossing record territory into 16,000 land. It's even better to have money in one of the banking giants; they're all ahead of the market just now.
The chief reason for the good news is Janet Yellen. Her nomination as the next Fed chief was approved by the Senate banking committee. That's the first, crucial step toward confirmation, and the 14-8 committee vote in her favor bodes well for her chances to get the final nod. Yellen's statements so far indicate a willingness to work with the country's major financials instead of slapping burdensome restrictions on them -- hence, the Dow-beating day enjoyed by the nation's top financials.
This is also due, in no small part, to the lingering sense of immense relief following JPMorgan Chase's (NYSE:JPM) $13 billion settlement with the government earlier this week. Although that's an awfully expensive "sorry," it finally throws a huge monkey off the company's back. Theoretically, the Feds shouldn't come after the bank for its sales practices of mortgage-backed securities any more... but that's an awful lot of scratch, and the political pressure to punish lenders from that era hasn't fully dissipated. Still, it's good news, and the firm's stock is reflecting that with a 2% gain on the day.
What apparently isn't going up, however, is compensation at the bank. According to a report from Reuters today citing the ever-popular "sources familiar with the matter," the company plans to keep its pay more or less level from last year. Compensation costs aren't really a problem at JPMorgan Chase; nevertheless, it'll be worth watching how the company's higher-flying investment bankers and executives react to the news -- i.e., if they stay with the firm or defect for more lucrative employment elsewhere.
As goes the overall banking sector, so goes Bank of America (NYSE:BAC). The bullish glow lighting financial stocks has illuminated the company. Its shares have vaulted above the $15 mark today, a level they haven't seen since January 2011. An interesting tidbit of news on the IPO front is a positive for both it and JPMorgan Chase; Bloomberg is reporting that advisors for Chrysler are looking at a valuation of around $10 billion for the carmaker's planned upcoming market debut. That should rain plenty of money in fees on the two banks; they're the pair leading the offering, after all.
Meanwhile, all seems to be fairly quiet on the Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) fronts. Citi stock is lapping its rival on the day, maybe because of the latter's outlook on the future of government-bank relations in the wake of the crisis. During a panel discussion in New York today, Wells Fargo's CFO Tim Sloan opined that the idea of "too big to fail" is essentially over in this country, saying that the government now has new means to cope with bank meltdowns. He's got a point, but his bank's investors might not be happy to hear the view being put quite so bluntly.
Besides, although her testimony has pleased the market so far, no one really knows how the presumptive new Fed Chairman Yellen is going to act, and how she'll get along with the nation's major financials. The hope, of course, is that she won't have to tangle with a full-scale crisis and collapsing big banks in the first place.