Volatility in the price of bank stocks returned last week with renewed vigor as bears and bulls clashed over the Obama administration’s failure to release its bank rescue plan. Rumors regarding imminent nationalization focused especially on Citigroup ( C ) and Bank of America ( BAC ) and caused those stocks to plummet on Thursday morning. Citigroup traded as low as $3.20, which was still above its $2.80 low of January 20th. BAC, however, was really taken to the woodshed and collapsed to $3.77, which was a 25 year low.
Members of the Obama administration must have been watching the deterioration, because news began to leak regarding the forthcoming bank plan. The leaks were all attributed to unidentified sources close to the discussions and revealed that this administration was not hell-bent on destroying the last remnants of common equity in the large banks.
As that news spread, the shorts ran for cover, the longs said “gotcha,” and the market in bank stocks improved dramatically along with the rest of the market. At the close on Friday, Citigroup was trading at $3.91. In after hours trading it traded as high as $4.07. The market seemed to gather momentum at the close so there is hope that Citigroup will be able to challenge its January 28th high of $4.33 as early as Monday, February 9th.
Members of the Obama administration must have been watching the deterioration, because news began to leak regarding the forthcoming bank plan. The leaks were all attributed to unidentified sources close to the discussions and revealed that this administration was not hell-bent on destroying the last remnants of common equity in the large banks.
As that news spread, the shorts ran for cover, the longs said “gotcha,” and the market in bank stocks improved dramatically along with the rest of the market. At the close on Friday, Citigroup was trading at $3.91. In after hours trading it traded as high as $4.07. The market seemed to gather momentum at the close so there is hope that Citigroup will be able to challenge its January 28th high of $4.33 as early as Monday, February 9th.
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