Money & Investing - Banks.com

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Earlier gains on the stock market today are slipping away. Financials had been leading the way, and these stocks are now trying to hold on to what they can. Indeed, things have turned somewhat dour since stocks around the world are pulling back. Even today’s positive news that unemployment filings fell last week have been unable to keep the stock market in the black. For now, though, many financial firms are seeing share price gains. And some of the names might surprise you. Here are some of the companies seeing gains today on the stock market, even as the general market heads in the negative direction:

• AIG
• American Express
• Fortress Investment
• CIT Group
• MBIA
• Genworth
• Citigroup
• Hartford Financial

It appears that government help has managed to keep some companies, formerly bordering on insolvency, going. And, of course, a general feeling that the worst of the recession is over pervades, helping investors feel a little more confident in financial stocks. JP Morgan Chase, Fifth Third and SunTrust, however, are not seeing the same gains. But that may mean that now is a good time to buy while they are down. The Financial Selext Sector SPDR has moved lower, tracking the overall performances of the financial sector.

Choosing financial stocks

It is important, going forward, to be careful about which stocks you invest in. While it appears that the worst of the recession is over, and that the financial world is mostly recovered from the financial crisis (bank profits are recovering quite nicely), there are still some concerns. And one also has to consider that this sort of thing could happen again. Trying to pick any stock is a tricky business. However, if you are into picking stocks, now is the time to get in while the market is still relatively down, and has the potential to gain significantly in the next two to five years. (Actually, the best time to get in was back in January and February, when the Dow was extra low. Or even a couple months ago while the Dow was below 8,000.)

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

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Yesterday saw a rather enthusiastic rally on the U.S. stock market. However, the excitement doesn’t seem to be holding over today. Even news of Goldman Sachs’ large profits can’t change the mood on Wall Street today, although the bulls are making an attempt to drive stocks back into the black. It’s been an interesting session so far, with the Dow swinging between gains and losses. The trouble the bulls seem to be having has to do with concerns about the future. MarketWatch reports on the worries that some Wall Street investors with regard to the future of the economy — and how that might affect the banks:

Despite that welcome news, some market veterans remained on the defensive Tuesday morning. Worries about whether the banks’ good fortunes can continue or whether the recent market correction was sufficient to shake out the excesses of the spring’s rally were still afoot, keeping major indexes in check.

Referring to a scenario that is widely expected to come true in the next few months, strategist Bill King, of M. Ramsey King Securities in Burr Ridge, Ill., said: “The banks just aren’t set up to handle a double-digit unemployment rate. Once we see that in the economy, it causes a whole bunch of problems for them,” including potential for renewed wave of loan defaults.

Even though it appears as though the banks may be on the verge of getting back on their feet, if people can’t meet their obligations, it is likely that they will add to the mounting losses banks have experienced since the subprime mortgage collapse and subsequent financial crisis. There is quite a ways to go before banks, the stock market and the economy are out of the woods.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.

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Back in February, there was talk of a deal in which Citi could issue shares to the government in order to raise capital. Very little has been heard on the subject since, and little has been done to make it happen. Until now. Today, Citi announced that it would allow the government to be the company’s biggest investor. The Street reports on the basics of the agreement:

Under the agreement, announced in February, the Treasury Department will exchange a portion of its preferred stake — roughly $25 billion — for interim securities and warrants. The government will also exchange the remaining preferred shares into trust preferred securities, Citi said.

After the exchange, the government will have roughly a 34% stake in Citi.

Citi’s conversion, first announced in February, is expected to boost the struggling financial institutions tangible common equity level by $61 billion and its Tier 1 capital by $64 billion.

The move should make Citi extremely well capitalized, helping the embattled company remain afloat — and even somewhat competitive. The announcement comes one day after the Treasury Department cleared 10 banks to repay their TARP funds. Citi, however, was not one of the named banks. The 10 banks cleared to exit TARP are:

1. Morgan Stanley
2. American Express
3. Bank of New York Mellon
4. BB&T Corporation
5. Capital One Financial
6. JP Morgan Chase
7. Northern Trust
8. State Street Corporation
9. U.S. Bancorp
10. Goldman Sachs

The fact that Citi is not on that list, nor Bank of America, does not come as a huge surprise to most people. However, over all the fact that many of the banks are feeling secure enough to pay back the money they owe taxpayers — as well as efforts to capitalize other banks (even though the government will become a major investor) — is encouraging. There are hopes that this will help the stock market eventually. Right now, though, this morning’s strong start for the Dow and the S&P 500  appears to be waning.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.