Bank stocks helped push the stock market higher today. The stock market has been pummeled by heavy selling pressure, concerns of global economic growth, and myriad issues that could have a longer lasting impact than just a government shut down. Though stocks slumped during early morning trading, several sectors have helped boost stocks into recovery mode. One segment helping to drive the market higher on Wednesday has been financials.
At the beginning of the hour, bank stocks began trading higher, and the Financial ETF (XLF) managed to make a move back toward morning highs of $24.04. Banks helping the rally included Bank of America (BAC) which breached the $25 level during morning trade. JP Morgan (JPM) battled back above $99, and Goldman Sachs (GS) inched closer to $172 a share on Wednesday. While these banks helped lead the sector, others like Chubb Ltd (CB) lagged, hitting lows of $126.40 during lunch.
As stated on the ETF overview page, the financial select sector XLF, which tracks many bank stocks, “seeks investment results that- before expenses- correspond generally to the price and yield performance of publicly traded equity securities of companies in the Financial Select Sector Index. The fund generally invests substantially all- but at least 95%- of its total assets in the securities comprising the index. The index includes securities of companies from the following industries: diversified financial services; insurance; banks; capital markets; mortgage real estate investment trusts; consumer finance; and thrifts and mortgage finance. The fund is non-diversified.”
Barclays Says Banks Are Undervalued
Also helping the boon to bank stocks was a note from Barclays (BCS). The bank is predicting that U.S. large-cap bank stocks could outperform the S&P in 2019. Of course, this is to be seen with only one day nearly in the books for 2019. The sentiment, however, appears to be slightly bullish from today’s move in bank stocks.
We shouldn’t forget that corporate debt is still at all-time highs. There is also no indication that the Federal Reserve will change its stance on interest rates for the year either. Financial solvency in the banking sector should be something to take a close look at. Any waiver in the strengths of banks could trigger volatility within the industry and, in turn, the market weight placed on equities.
On a global scale, the European Union’s top banks have continued to strengthen their solvency. They have bettered their ability to take on a large-scale financial shock and to defend its economic consequences on their own.
Thought the global economy is expected to slow, it would appear, that for now, the banking sector has grown stronger. The next phase is yet to be seen as the market weighs debt and rates against the political uncertainty between world powers: the United States & China.