Good Data On The Home Front, But Regional Banks Still Languishing (RF, FITB, MI, ZION)

Regional banks are about as closely tied to the U.S. economy as any sector out there. They have no international exposure and their success depends upon consumers and businesses being able to pay back loans promptly. Today's economic data showed the U.S. economic recovery is taking hold. Consumer spending rose for a fourth straight month in October while consumer sentiment in November reached its highest level since June. Perhaps most importantly, initial jobless claims fell to their lowest level in more than TWO years!! Initial claims fell 34,000 to 407,000, the lowest level since mid-July 2008, the Labor Department said. Claims have now entered territory that economists say suggest solid job creation. The Dow Jones Industrial Average (DJIA) rose 150 points today on the back of this news. However, banks remain stuck in the mud. Regions Financial RF finished a modest 2 cents higher to $5.23. Marshall & Ilsley MI and Zions Bancorp. ZION both finished lower on the day. One bright spot was Fifth Third Bancorp FITB, which closed up 2.21% to $12.04. At some point, if a recovery is to take shape, regional banks will have to participate. No economy can remain strong and vibrant without a strong banking system. Either the market is mispricing these names and they offer tremendous upside, or the recovery is not really that strong and the price action in these names is merely reflecting economic reality. Stay tuned!