Rising Rates Bolstered Bank Stocks Last Week
Markets covered more than 50% of lost ground
The stock markets have recovered more than 50% of their losses from the sell-off earlier this month. The positive momentum continued last week with the S&P 500 Index (SPX-INDEX) (SPY) gaining 0.55% to close the week at 2,747.30. The Nasdaq Composite (COMP-INDEX) (QQQ) was the biggest gainer among the major indexes with a rise of 1.4% to 7,337.39, while the Dow Jones Industrial Average (DJI-INDEX) (DIA) rose 0.36% to finish the session at 25,309.99.
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Bank stocks were the winners
Given the strong economic growth, low unemployment rate, and strengthening consumer sentiment, demand for loans is set to rise in the near term, which would be beneficial to banks, as it could boost their net interest margins. Mortgage rates have already started edging higher. The US 30-year mortgage increased for the seventh consecutive week to average 4.4% last week, the highest since April 2014.
Financials continued to post positive gains with the S&P 500 financial index advancing 0.38% to close the week at 482.4. At 2.3%, J.P. Morgan (JPM) was the biggest gainer last week. Other notable gainers included Morgan Stanley (MS), Citigroup (C), and Bank of America (BAC), which rose 1.7%, 0.3%, and 0.2%, respectively. The Financial Select Sector SPDR ETF (XLF) and the Vanguard Financials ETF (VFH) reported gains of 0.5% and 0.2%, respectively.