What Factors Are Driving Financials?
Strong tailwinds drove financials
The US market rose last week after an overwhelmingly positive US jobs report. The strong jobs data enhanced the chances of another interest rate hike by the Fed in 2017. Last week, financials reached the highest level since December 2007 in anticipation of higher interest rates. There was also the hope of early deregulation of the banking sector. Investors chased banking stocks and ignored technology stocks, which pushed up the S&P Financial Sector Index 1.8% to 420.88. In contrast, the broader S&P 500 Index (SPX-INDEX) rose 0.19%.
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Among the major banks, Bank of America (BAC) rose 3.9%, Morgan Stanley (MS) rose 3.0%, Goldman Sachs (GS) rose 2.8%, JPMorgan Chase (JPM) rose 2.6%, and Citibank (C) rose 2.30%. On the other hand, Wells Fargo (WFC) was still the laggard—it fell 0.86%.
The financial ETFs also posted strong gains. The Financial Select Sector SPDR ETF (XLF) rose 1.9%, while the SPDR S&P Bank ETF (KBE) and the SPDR S&P Regional Bank ETF (KRE) rose 1.7% and 1.6%, respectively. The S&P Insurance Select Industry Index (SPSIINS) rose 0.90%.