ETFs pegged to the U.S. banking sector are rallying along with top holdings that have announced dividend increases and share buybacks after passing the Federal Reserve’s latest stress tests.
SPDR S&P Bank ETF (NYSEArca: KBE) was up 1.5% in early trading Wednesday following the previous day’s rally.
The Fed said four of the 19 banks that received a financial bailout didn’t pass the test, including Citigroup (NYSE: C). The banks must submit capital plans to the Fed.
JP Morgan (NYSE: JPM), Wells Fargo (NYSE: WFC) and U.S. Bancorp (NYSE: USB) were among the banks that announced dividend hikes and share repurchase plans. [Financial ETFs are Money in the Banks]
Banks are outperforming the market on better employment data and improved balance sheets. The bank ETF is up 24.8% the past three months, compared with a 14.5% gain for the S&P 500, according to Morningstar. Banks were the market’s unloved sector last year as the sector ETF lost 22%.
Shares of Bank of America (NYSE: BAC), which passed the stress test, rose 4% Wednesday morning to near $9 a share. The stock is the second-largest holding in the bank ETF.
SPDR S&P Bank ETF
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