Bank Stocks Rose amid Expectations of Higher Rates
US stocks at record high
Last week, US stocks posted strong weekly gains and reached record levels. The S&P 500 Index (SPX-INDEX) rose 1.6% and crossed 2,500 for the first time despite more political turmoil in the US and rising tensions with North Korea. The NASDAQ Composite Index rose 1.4% to 6,448.47, while the Dow Jones Industrial Average rose 2.2%.
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The SPDR S&P Bank ETF (KBE) rose 4.20% for the week—its biggest weekly rise since June. The SPDR S&P Regional Banking ETF (KRE) rose 4.4%, while the Vanguard Financials ETF (VFH) rose 3.3%. Bank of America (BAC) was the biggest gainer with a 6.5% rise. Morgan Stanley (MS), Citibank (C), Wells Fargo (WFC), and Goldman Sachs (GS) rose 5.9%, 4.3%, 4.20%, and 3.7%, respectively.
The jump in bank stocks and financial ETFs comes on the back of stronger-than-expected inflation numbers, which increased the expectations for a Fed rate hike. According to the U.S. Department of Labor, the consumer price index rose 1.9% year-over-year last month. The market expects a 52.9% chance of a December Fed rate hike, according to CME Group’s Fed Watch tool.
Relief rally for insurance stocks
Hurricane Irma’s lower impact helped propel insurance stocks to higher levels. The stocks had trended downwards for weeks. The S&P Insurance Select Industry Index (SPSIINS) rose 2.9% last week, while the SPDR S&P Insurance ETF (KIE) and the iShares Dow Jones US Insurance Index ETF (IAK) rose 2.7% and 2.2%, respectively.