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Don't look now. Bank stocks are rallying

August 20, 2012: 2:11 PM ET

The market was mostly lower on yet another sleepy August day of trading. But bank stocks were among the more notable standouts. Bank of America (BAC) and JPMorgan Chase (JPM) were two of the better performers in the Dow. Morgan Stanley (MS) and Goldman Sachs (GS) were each up more than 1.5% And Citigroup (C) had gained more than 2%.

The big banks have been riding a hot streak for the past month -- even though second quarter earnings report in July were mixed at best. Is the worst over? Traders on StockTwits are mostly optimistic.

bespokeinvest: The rotation out of Utilities and other defensives has been fierce:$XLU $QQQ $SPY $DIA $XLF $XLY $XLI $IYZ

TJAnderson: most financials through resistance of the last 2 weeks and also resistce of June 18 - 22$JPM $C $BAC(trying). Looking for grind higher

RedDogT3Live: Banks showing some life after some nice consolidation. Bought some $JPM and $BAC for a trade

The market's relentless march higher through this low-volume August has been interesting to watch. It does seem like investors are willing to embrace riskier stocks, like the major banks, again. I'm still a little skeptical since earnings in the third quarter could be weak given the relatively lackluster environment for IPOs and mergers. But there is one thing the banks have going for them that should help ...

stephanie_link: JPM raises 3Q eps on banks - $STI $RF$BAC and others on better mortgage revs and better NIM. Continue to like $WFC $JPM $STI.

It is true that the signs of life in housing should be good for a variety of banks big and small. If the housing rebound is finally for real -- and it is starting to look that way -- then many banks could be in a position to benefit from demand for new home purchases. Mortgage rates will probably remain low for some time. But the key will be whether or not the banks are willing to loosen standards and actually make more loans.

Still, I'm worried that the banks are rallying in part due to hopes that they are going to get help from Mario Draghi and Ben Bernanke in the form of more easy money.

DeidreZune: Great if Banks joined the rally on ECB action anticipation. $XLF call buying was impressive on Friday $GS $JPM$C $BAC $WFC $SPY $AAPL

Investors have been burned betting on more easing from Super Mario and Big Ben before. And let's be honest here. If the best you can say about the banks now is that the ECB might buy more troubled sovereign debt and that the Fed might hint at QE3 in a few weeks, is that really a compelling reason to be excited about the banks?

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Paul Lamonica
Paul R. La Monica
Assistant Managing Editor, CNNMoney

Paul R. La Monica is an assistant managing editor at CNNMoney. He is the author of the site's daily column, The Buzz, and also tweets throughout the day about the markets and economy @LaMonicaBuzz. La Monica also oversees the site's economic, markets and technology coverage.

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