Financial sector-specific exchange traded funds strengthened after J.P. Morgan Chase (NYSE: JPM) and PNC Financial Services Group (NYSE: PNC) helped kick off the earnings season with better-than-expected first quarter results.
The Financial Select Sector SPDR (NYSEArca: XLF), the largest financial sector-related ETF on the market, increased 1.7% on Friday.
Bolstering the financial sector, J.P. Morgan Chase revealed profits rose 5% and topped expectations on strength from its consumer banking, the Wall Street Journal reports. The country’s largest bank by assets revealed profits of $9.18 billion, or $2.65 a share, over the first quarter while revenue rose to $29.12 billion from $27.91 billion a year ago.
J.P. Morgan shares gained 4.5% after the announcement. JPM makes up 11.2% of XLF’s underlying holdings.
PNC showed strong loan growth that helped fuel revenue and profits, the Wall Street Journal reports. Revenue for PNC gained 4.3% year-over-year to $4.29 billion, compared to analysts’ expectations of $4.27 billion in revenue.
Total loans at PNC rose 4.8%, mainly due to an increase in commercial loans while consumer lending grew at a slower pace.
PNC shares advanced 3.3% on Friday. PNC makes up 1.9% of XLF’s underlying portfolio.
“Several factors have driven a shift in our view, including a lower absolute rate outlook, a flatter curve, tightening loan spreads resulting from a competitive market with ample liquidity, and continued upward pressure on deposit pricing,” Shrewsberry said.
WFC makes up 6.3% of XLF’s portfolio.
Bank stocks have been under pressure going into the earnings season after Federal Reserve shifted to a more patient stance on interest rate hikes for the rest of the year. The shift in policy sent bank stocks sliding and led analysts to cut profit expectations for many banks.
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