Supporting market gains, shares of J.P. Morgan (NYSE: JPM), Bank of America (NYSE: BAC) and Wells Fargo (NYSE: WFC) advanced after the banks reported fourth quarter results. JPM rose 0.2% on better-than-expected Q4 results. BAC still managed to eke out a 0.3% rise despite revenue coming in below expectations. WFC also returned 0.9% even after a drop in the bank’s fourth quarter earnings.
XLF includes a hefty 10.7% tilt toward JPM, along with 8.6% WFC and 8.1% BAC. KBE, on the other hand, follows a more equal-weight indexing methodology and includes 2.3% JPM, 2.2% WFC and 2.3% BAC.
The financial sector strengthened after the three banks revealed strong quarterly profits and expressed optimism for the year ahead in the ir first public comments over earnings, reports Tanya Agrawal for Reuters.
According to Thomson Reuters, the combined profit of S&P 500 companies is projected to have returned 6.2% in the fourth quarter, largely due to improving results out of the financial sector.
“Financials have had a very good run post election and the data we’ve gotten today from the big banks has been very good and we do expect this sector to post strong earnings mostly due to the rising interest rate environment,” Jon Adams, senior investment strategist at BMO Global Asset Management, told Reuters.
Financials have also been among the best performers since the elections, with the KBW Bank Index up 23% since November 8, as traders speculated that higher U.S. interest rates and potential rollback of financial downturn-era regulations would bolster the sector.
Looking ahead for other major bank earnings, Morgan Stanley (NYSE: MS) will report earnings January 17, Goldman Sachs (NYSE: GS) on January 18, Citigroup (NYSE: C) on January 18, KeyCorp (NYSE: KEY) on January 19.