Financial Stocks Chart Lucrative Quarter Only Technology Sector Outpaces Banks And Brokers

Technology stocks may be the runaway leaders of the 1995 bull market on Wall Street, but another group has lately been sneaking up on them.

Financial stocks - banks, brokers and other financial-services companies - rang up some of the best gains in the third quarter, which ended with Friday’s trading. That catapulted them into a strong position in the rankings for the first nine months of the year as well.

Through Sept. 22, Dow Jones & Co.’s composite of 13 industry groups in technology showed a 41.54 percent gain for the year.

Right behind, with a 40.35 percent advance, came the Dow Jones composite of 14 financial industries.

But the financial sector captured three of the top five spots. Securities brokers ranked No. 2 with a 56 percent gain; money-center banks No. 3 with a 52 percent gain, and Eastern banks No. 5 with a 50 percent rise.

Bank stocks have been bolstered by merger activity, and most financial stocks in general have benefited from declining interest rates.

Most analysts agree, however, that enthusiasm for many types of financial issues also stems from longer-term political and population trends that favor companies in the savings and investment businesses.

As the population in general, and the baby-boom generation in particular, grows steadily older, it is producing more and more prime customers for financial services ranging from insurance to mutual fund retirement accounts.

In politics, meanwhile, Wall Street firms and their clients are anticipating changes favoring savings and investment over consumption.

Farther out, the prospects extend to more radical tax reform, along with hoped-for progress toward closing the federal government’s decades-old budget deficit.

All this appears to have attracted some long-term investors to securities industry stocks, which were once regarded as hopelessly in thrall to the short-term ups and downs of the markets.

Shares of Merrill Lynch, the giant full-service broker, have climbed from under 35 in January to as high as 63 of late. Charles Schwab, the largest discount broker, has jumped from under 12 as 1995 began to above 28 in September.

Both of those stocks represent plays on the bull market in stocks and bonds, as well as the boom in mutual funds, where both Merrill and Schwab have major parts of their operations.