Rate Hike Expectations Propelled Financial Stocks Higher


Dec. 16 2015, Published 12:43 p.m. ET

Financial stocks

Many banks and financial service providers’ stocks rose on Tuesday, December 15. US investors picked the stocks with the expectation that normalized rates will replace the zero interest rate policy at the current FOMC (Federal Open Market Committee) meeting in December. Traders and investors bet on the rising prospects of the rate hike. As a result, banks’ stocks became attractive. The increased borrowing cost will lead to higher profit margins. The stocks of Keycorp (KEY), Fifth Third Bancorp (FITB), Suntrust Banks (STI), U.S. Bancorp (USB), M&T Bank (MTB), and PNC Financial Services (PNC) rose by 3.4%, 3.4%, 3.1%, 2.9%, 2.8%, and 2.2%, respectively, on December 15.

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Analyzing moving averages

The above graph shows the moving average values of the above-stated stocks along with their respective analyst stock price targets.

  • KeyCorp, Fifth Third Bancorp, Suntrust Banks, U.S. Bancorp, M&T Bank, and PNC Financial Services’ stocks belong to regional banks and diversified banks.
  • The value of beta of these stocks is more than one. This implies that these stocks are sensitive to the broad market movement—affected by macroeconomic factors. Currently, this is the decision on the rate hike.
  • The average trailing one-year return of these stocks is 5.0%. The average trailing one-month return is 1.7% as of December 15.
  • The trading prices of these stocks are greater than their respective 100-day, 50-day, and 20-day moving averages except for KeyCorp. Its settling price was below its 100-day moving average value.
  • When the trading price of any stock crosses its moving averages, it denotes the upward price trend of the stock. As a result, the above stocks move in an upward direction.
  • KeyCorp, being an exception to the above moving average analysis, managed the highest returns on the day because it predicted the EPS (earnings per share) growth of 5.5% in 2016 on Tuesday, December 15. KeyCorp delivered EPS growth of 19.7% in the last five years.
  • Compared to analysts’ stock price targets, the average growth potential of the stocks listed above is 8%.
  • On an average basis, these stocks earned 15 “buy,” 20 “hold,” and one “sell” recommendation.

Next, we’ll look at the key stocks of the SPDR S&P 500 ETF (SPY) as of December 15.


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