NEW
YORK: The shares of JPMorgan Chase & Co, Bank of America Corp and other
banks rose Friday, in stark contrast with former investment banks Goldman Sachs
Group Group Inc and Morgan
Stanley.
Bank of America and
JPMorgan shares closed up more than 6 percent and 13 percent, at $20.87 and
$41.64, respectively, in late afternoon trading. The shares of Citigroup Inc ,
which withdrew its bid on Thursday to buy struggling regional bank Wachovia
Corp, also closed higher at $14.11, or up about 9
percent.
But Morgan Stanley and
Goldman Sachs, which recently converted to bank holding companies to boost
deposits and calm investor concern about their funding sources, saw their share
prices fall some 22 percent and 12 percent,
respectively.
Analysts and
investors attributed the rise in other financials to short covering, as
investors bought up shares believing government action to stabilize Morgan
Stanley and the rest of the market may be possible this
weekend.
"I'd be surprised if
people would want to be short financials going into the weekend," said Owen
Fitzpatrick, head of the U.S. equity group at Deutsche Bank Private Wealth
Management in New York.
Others
noted a slight easing in the commercial paper market, which is crucial for bank
funding, as a possible reason for the boost in bank
shares.
"There's so much
anxiety within the financial system that any good news could set the stage for a
dandy rally," said David Rolfe, chief investment officer at Wedgewood Partners,
in St Louis, Missouri.
Merrill
Lynch & Co Inc , which agreed last month to sell itself to Bank of America,
rose from a year low set on Thursday to $15.75, up more than 18
percent.
At this level, the
shares are trading at a 14 percent discount to the price implied by Bank of
America's offer, which suggests some doubt the deal will go through. Analysts,
however, believe Merrill would struggle to survive on its own.
"Given what's happened with
Morgan Stanley today, I cannot see under any circumstance that Merrill would try
to walk away from this deal ... nor do I think that (Bank of America Chief
Executive) Ken Lewis will try to renegotiate," said Nancy Bush, analyst at NAB
Research.