Wall Street Banks Enjoy Their Best Week Since President Trump's Election

By Mark DeCambre Markets MarketWatch Pulse

Banks shares are on track to log their best weekly gains since the week President Donald Trump was voted into the White House. Popular funds that track the financial sector, including the Financial Select Sector SPDR ETF , the SPDR S&P Bank ETF , and the regionally focused SPDR S&P Regional Banking ETF are all on pace to post their best weekly percentage gains since Nov. 11, according to FactSet data. Weekly gains for the XLF were more than 3%, while the other ETFs were on pace to show a gain of more than 5% over the past five trading sessions. Banks had been among the best performers in the wake of Trump's victory, which Wall Street welcomed with his pledge of deregulated markets, tax cuts and a plan to spend some $1 trillion on improving roadways, tunnels and bridges. However, financials had pulled back as Trump's pro-Wall Street agenda looked stalled by White House drama centered on Russia's ties with members of Trump's administration and his firing of ex-FBI Director James Comey, who was investigating those relationships. This week, however, banks have gotten a bid partially on the back of expectations that the Federal Reserve will lift interest rates at the conclusion of its two-day policy meeting on June 14. A slight reflation of benchmark Treasury yields [BX:TMUBMUSD10Y], which are still at very low levels, also has helped to stoke some hope that financials may see improved profitability, with higher rates viewed as supportive to their business models. Also on Thursday, the House of Representatives passed a bill to roll back so-called Dodd-Frank rules, intended to rein in bank activities after the 2008-'09 financial crisis. In Friday trade, the Dow Jones Industrial Average was being led higher by Goldman Sachs Group Inc. , boasting its best week since the week ended Nov. 11, and J.P. Morgan Chase & Co. , which were contributing near 40 points to the price-weighted blue-chip gauge. Banks were the best performer in the S&P 500 index , up 1.4%. Helping both indexes trade in record territory. Dick Bove, prominent bank analyst at Rafferty Capital, said investors should approach the bank rally with caution because he sees few signs that economic activity is picking up sufficiently to justify buying banks. "People believe there's going to be a surge in economic activity and that is going to increase bank earnings, but I don't see that happening yet," he said.

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