Higher rates? Bring it on say banks and insurers


Much of the financial sector is lit up bright green, continuing to outperform following yesterday's suggestion by the FOMC and Janet Yellen that rate hikes could come sooner than expected. XLF +1.1%, KBE +1.6%, KRE +1.6%.

At new 52-week or even multi-year highs are JPMorgan (JPM +2.3%), Wells Fargo (WFC +1.7%), Morgan Stanley (MS +1.4%), and Bank of America (BAC +1.6%).

Regional lenders: U.S. Bancorp (USB +1%), Huntington (HBAN +1.5%), PNC (PNC +1.3%), BB&T (BBT +1.5%), Fifth Third (FITB +1.8%), First Niagara (FNFG +2.1%).

Leading among the life insurers are Lincoln National (LNC +1.9%), Protective Life (PL +1.6%), Manulife (MFC +1.2%), and Sun Life (SLF +1.1%).

ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, KIE, IAT, SEF, IYG, IAK, FXO, PFI, KBWB, RKH, QABA, FNCL, FINU, KRU, RWW, KBWR, RYF, PSCF, KBWI, KBWP, KRS, FINZ

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Comments (5)
  • PalmDesertRat
    , contributor
    Comments (3737) | Send Message
     
    It's not higher rates that the banks want but a wider yield curve.
    20 Mar 2014, 11:06 AM Reply Like
  • Hello Again 83
    , contributor
    Comments (678) | Send Message
     
    I would say both.
    20 Mar 2014, 12:20 PM Reply Like
  • Buckoux
    , contributor
    Comments (8817) | Send Message
     
    The interest rates are to the circulation of money what gravity is to the water vapor in clouds. Gravity causes the rain to fall and interests rates cause good money to seek worthy borrowers. The Fed has suspended the financial equivalent of 'gravity' in the American economy with QE and <.25% interest rates. As interest rates raise, so will GDP and unemployment will fall. Simplistic? Wait and see.
    20 Mar 2014, 12:23 PM Reply Like
  • PalmDesertRat
    , contributor
    Comments (3737) | Send Message
     
    Rising interest rates do not create economic activity. Rather, increasing economic activity is prompting the Fed to taper and eventually to increase rates. Increasing loan demand also puts upward pressure on rates.

     

    Banks live off the spread between their cost of funds and the rates they charge. They are less sensitive to the absolute rate. The spread will increase as the yield curve widens, which usually happens in an increasing economic and interest rate environment.

     

    Widening spreads lead to higher earnings,as do lower loan-loss provisions resulting from an improving economy. Banks stock prices are rising in anticipation.
    20 Mar 2014, 01:05 PM Reply Like
  • stonecatcher
    , contributor
    Comments (11) | Send Message
     
    Have you all forgotten TARP and the GAO's report on the $16 plus Trillion that was "loaned" to the various banksters at zero percent interest. Who needs to lend. The whole game is rigged, while the "function" of money is passe. Why bother to "earn" when you can just take?
    20 Mar 2014, 02:56 PM Reply Like
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