Exchange-traded funds that track and financial and banking sectors rose sharply on Wednesday, after the Federal Reserve raised interest rates, as had been widely expected. The Financial Select Sector SPDR ETF rose 1.3% while the SPDR S&P Bank ETF was up 1.2%. The SPDR S&P Regional Banking ETF gained 0.9%. The Fed stuck to its prior forecast of three rate hikes in 2018, though it projected another three in 2019, rather than the two it previous indicated. In contrast to the broader equity market, bank stocks tend to benefit from environments with higher interest rates, as rates boost their net interest margins, or the difference between the interest they earn on the loans they make and the interest they pay out. Low rates can depress their net interest margins, which can lead to lower earnings. Also boosting the sector was the steeping yield curve, which is also seen as providing a tailwind for bank profits. The yield for the U.S. 10-year Treasury note was 2.92% while it was 2.34% for the two year note. The Dow Jones Industrial Average rose 0.6% while the S&P 500 was up 0.4% and the Nasdaq Composite Index rose 0.2%. Among individual stocks, Goldman Sachs rose 0.9% while JPMorgan Chase & Co. was up 1.5%.
Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Visit MarketWatch.com for more information on this news.
From:: Stock Market News