Banks and financial sector-related ETFs are leading the charge as traders look forward to the start of an expected strong earnings season.
The Financial Select Sector SPDR (NYSEArca: XLF), the largest exchange traded fund tracking the financial services sector, jumped 1.8% Thursday while the S&P 500 gained 0.8%.
Financials are among the first up to bat at the start of each earnings season, and investors anticipate the recent surge in volatility, along with higher rates, to bolster trading activity and net interest revenue among banks, asset managers and other financial firms, the Wall Street Journal reports.
According to FactSet, S&P 500 financial companies are projected to experience a 20% jump in earnings growth for the quarter year-over-year, compared to the broader index’s 17% gain.
Big Wall Street banks including J.P. Morgan Chase (NYSE: JPM), Citigroup (NYSE: C) and Wells Fargo (NYSE: WFC) are slated to report quarterly results Friday.
These three companies make up large weights in the financial sector. XLF includes 11.5% JPM, 6.9% WFC and 5.4% C. The ETF has a hefty 44.5% tilt toward banks, followed by capital markets 24.5%, insurance 17.5% and diversified financial services 11.6%.