Yellen Talks, Banking Stocks Rise

Yellen Talks, Banking Stocks Rise

Who's afraid of the Fed chief-to-be? Not investors in big banking stocks, if today's share prices are any indication. Janet Yellen's day in the hot seat of her confirmation hearings went quite smoothly. She didn't say anything controversial to the Senate banking committee members pelting her with questions. Nor did she tip her hand about when her organization might start winding down quantitative easing. So far, so good, at least for the financial industry.

Bank of America stock is doing the best out of the banking giants this afternoon. Perhaps that's because Yellen, during her hearing, didn't dismiss the idea of a "too big to fail" institution out of hand. Nobody wants a repeat of the crisis-era bailouts, but it's comforting to know that the Fed will probably not completely close the funding taps.

That should also help settle the nerves of Citigroup investors, as the bank was essentially the poster boy for that government largess back in those bad old days. Like every other financial major, the company's in better shape now; it smartly hived off its worst assets into a separate entity, Citi Holdings, which has effectively been slimmed down since then. Around $122 billion remains in the unit -- not a small sum, but nearly 30% lower on a year-over-year basis. Citigroup is much less of a lummox than it was even just a few years ago.

Wells Fargo is, like its peers, beating the Dow today. In an interview with CNBC, the bank's CFO, Tim Sloan, put a bullish spin on the current state of the nation's housing market. He characterized it as being "very strong right now," which is the kind of music a Wells Fargo investor wants to hear. After all, mortgages are a critical part of the company's operations and if the housing business starts to grind slower, most likely the company's stock will suffer.

During his interview, Sloan said that for Wells Fargo growth in mortgage demand has been "choppy." That's due in no small part to rates for such loans; Freddie Mac's latest weekly primary mortgage market survey released today showed a bit of a jump in those numbers. The average 30-year fixed rate expanded to 4.35%, a gain of nearly 20 basis points over that of the previous week. The 15-year fixed didn't see as much of an increase but it was still up, hitting 3.35% from the previous 3.27%.

That being said, Wells Fargo is coping pretty well with the ups and downs of 21st century finance. But could the same be said for peer/rival JPMorgan Chase ? Yesterday, the company hosted a live question-and-answer session with one of its investment banking stars, Jimmy Lee, in which it solicited questions via the Twitter hashtag #AskJPM.

Be careful what you wish for, JP, because tweets rolled in from people unhappy with the bank's operations and irate at its business practices. One read, "Why is JP Morgan Chase foreclosing on my neighbor after she's paid for her house 4 times over? Disgusting." Meanwhile, another inquired, "Does it feel better paying the biggest bank fines in history so far, or did the satisfaction of the crimes outweigh the fines?"

Yikes. At least the bank knows when to cut and run. It canceled the session and beat a hasty retreat. "Bad idea! Back to the drawing board," a company spokesman said in an email statement. Yeah, no kidding. At least, investors are taking the foul-up in stride; JPMorgan Chase stock is closing the day in positive territory and beating the Dow while at it.

Going forward into the immediate future, ears will continue to be open to nominee Yellen's remarks about the banking system and the future of QE. But, like today, investors shouldn't expect her to say anything market shaking or disturbing enough to rattle their stocks. Let's just hope the Senate banking committee doesn't decide to solicit questions for her via social media.

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Fool contributor Eric Volkman has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Bank of America and Wells Fargo. It owns shares of Citigroup and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Originally published