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AAA  Jul. 12, 2013
Boosted by rising rates
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The Standard & Poor's 500 index has recovered from the near 6 percent selloff that began in late May and ended June 24.

During that time, 91 percent of stocks in the index fell. Investor worries intensified that the Federal Reserve would soon slow its economic stimulus and interest rates climbed.

Charles Schwab was one of the outliers. Its stock rose 7.8 percent over the same time, along with several other financial stocks. That's because they stand to benefit from rising interest rates.

For instance, interest rates have been so low that Schwab is among the asset managers that waived fees on money-market mutual funds to ensure clients earned slightly positive returns.

Last year, Schwab waived $587 million in money-market fees. The company had net income last year of $928 million. In 2011, Schwab waived $568 million in fees.

If interest rates climb, profits would jump as the industry again collects those fees and other benefits of higher rates. Such expectations led financial analyst William Katz of Citi Research to recently upgrade his outlook for the broader broker-dealer industry. He says Schwab will be one of the biggest beneficiaries, and he upgraded its stock to "Buy" from "Sell."

Associated Press
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