General Electric executive David Nason has emerged as a leading contender for Fed vice chair. That's bullish for the banks, says Cowen's Jaret Seiberg, who notes Nason hasn't called for tough capital rules, the return of Glass-Steagall, or the elimination of derivatives netting.
Other reported candidates for the position like the FDIC's Thomas Hoenig or former BB&T Chairman John Allison wouldn't be as positive for the sector, says Seiberg.
Nason is likely to get bipartisan support as he was respected on both sides of the aisle during when he served at Treasury under George W. Bush, adds Seiberg.
Bank earnings have been running hot, but having bid the sector sharply higher for nearly all of 2016, and particularly since the election, investors are selling the news.
The latest two examples are Morgan Stanley (MS -2.2%) and Comerica (CMA -4.2%), both of which blew past estimates this morning. Comerica, for instance, is up a tidy 85% Y/Y, including a 38% run over the last three months.
There was a bit of caution among bank investors in the past couple of days, but they're back to buying low and selling high this morning as the initial results from Q4 begin to pour in. Among those reporting today: Bank of America (BAC +1.8%), JPMorgan (JPM +1.9%), Wells Fargo (WFC +2.8%), PNC Financial (PNC +2.4%), First Horizon (FHN -0.3%).
An early take from KBW's Bose George: Mortgage banking trends are weakening in line with expectations - with stronger volumes being offset by lower gain-on-sale margins. Higher rates are still filtering through though, and industry sources and recent data suggest volumes falling 10-15% this quarter.
Piper's Kevin Barker calls Wells Fargo's operating numbers "decent," but notes rising auto loan net charge-offs - 1.05% in Q4 vs. 0.87% in Q3, and 0.59% a year earlier.
Bloomberg's Alison Williams takes note of the positive signal of boosted buybacks at Bank of America, and calls cost cuts "key." It's hard to get too excited about any particular metric given the bank's near-50% run higher in the past few months.
Other players: Goldman (GS +1.1%), Morgan Stanley (MS +2%), Citigroup (C +1.6%), U.S. Bancorp (USB +1.3%), Regions Financial (RF +3.2%), New York Community (NYCB +1.3%), Huntington Bancshares (HBAN +2.2%), KeyCorp (KEY +2.3%)
Q4 earnings season kicks off tomorrow morning with Bank of America (BAC -1.1%), Wells Fargo (WFC -0.8%), JPMorgan (JPM -0.8%), PNC Financial(PNC -3%), First Horizon (FHN -2.1%), and First Republic (FRC -1.4%) all reporting. BlackRock (BLK -1.4%) is also due up tomorrow.
Among those next coming next week: Citigroup (C -1.2%), Goldman Sachs (GS -1%), and Morgan Stanley (MS -1.2%).
The KBE is up a whopping 40% Y/Y, including a 23.5% run since the election. It's lower by 1.9% on today's session vs. the S&P 500's 0.5% decline.
Giving well-fed financial sector bulls another reason to take some profits is the continued decline in interest rates over the past few weeks, with the 10-year yield lower by another six basis points today to 2.32% - it topped at about 2.60% in mid-December.
KeyCorp (KEY -2%), Regions Financial (RF -1.5%), Fifth Third (FITB -1.5%), State Street (STT -1.7%), MetLife (MET -1.9%), Prudential (PRU -2.9%), E*Trade (ETFC -1.5%), Schwab (SCHW -1.2%).
3:22 ET The press conference ends with stocks at or about session lows, the S&P 500 down 0.8%, the Dow down 0.7%, and Nasdaq down 0.5%.
3:14 ET Bill Gross chimes in ... Today's rate hike and hawkish expectations for 2017 may have marked the top of the bank rally, he says. Not all higher rates are created equal, and if Fed rate boosts flatten the yield curve, it wouldn't be good for bank margins, he says. Banks have reversed big post-hike gains, with losses now about inline with the S&P 500's 0.75% decline. Citigroup (C -0.6%), Wells Fargo (WFC -1.9%), JPMorgan (JPM -0.3%), New York Community Bank (NYCB -0.6%), PNC Financial (PNC -0.7%), BB&T (BBT -0.8%). Insurers give up their gains as well: Prudential (PRU -1.3%), MetLife (MET -0.8%), Lincoln National (LNC -1.8%).
3:09 ET Asked about Dow 20K, Yellen first says she's not going to comment on the level of stock prices, but then says - given the low level of interest rates - stocks seem to be valued within normal ranges.
3:06 ET "I do intend to serve out my four-year term (as Fed Chair)," she says, when asked if anything has changed on her immediate future given the election results. Whether she get another four-year term after that, or simply moves back to the Board of Governors is a question for another day.
2:59 ET Asked how she feels about the president elect's views on easing big chunks of post-crisis financial regulation, Yellen says she's thinks D.C. (Fed included) has done a good job of insuring against a repeat, and wouldn't be a fan of a big rollback. She does think the burden on smaller institutions needs to be relieved. As for any contact with the Trump team, Yellen says it's only been at the staff level and only to help ensure a smooth transition.
2:53 ET I'm not trying to give advice to the incoming administration, says Yellen, after opining that additional fiscal stimulus at this point is probably not necessary to get the economy back to full employment.
2:50 ET Up sharply in the immediate aftermath of the Fed rate hike and more hawkish expectations for next year, the banks have given up those gains, and turned lower. The KBE is down 0.4%.
2:46 ET Asked by CNBC's Steve Liesman if plans for big fiscal spending and tax cuts would alter the Fed's plans, Yellen says she won't speculate on their impact without more details. Some at the central bank, however, did incorporate greater fiscal stimulus in their forecasts, she says.
2:43 ET First questioner wants to know if the Fed hiked rates because Trump was elected. Yellen isn't biting, and notes today's hike, along with the more hawkish "dots" are just modest adjustements.
2:40 ET Continued moderate economic growth will warrant "gradual tightening," but the outlook is "highly uncertain" and the path of fiscal policy is unknown.
2:34 ET The post-FOMC meeting press conference is getting underway. The Fed minutes ago hiked the Fed Funds target rate 25 basis points to a range of 0.5-0.75%, and somewhat surprisingly ratcheted higher its expectations for 2017 rate increases - now seeing three vs. two expected at the last forecast three months ago.
The broad market indices have moved lower, with the S&P 500 down 0.4%.
Fund managers' allocations to the banking sector jumped to a record-high 31% overweight in December, according to the BAML Fund Manager Survey - "an extreme" 2.1 standard deviation above the long-term average.
Some numbers to start: From the bottom of the great credit scare at the start of the year, the KBW Nasdaq Bank Index rose 33% up to the election, topping the S&P 500 by a big 12% during that period. Since the election, bank stocks have outperformed by another 12%, lifting their relative P/E to 77% of the S&P 500 (from 60% at the Feb. bottom).
"Goldilocks" is a phrase that hasn't been mentioned much since The Maestro ran the Fed, but Kotowski drags it out, and says it could be applicable in 2017-18, with credit costs staying low, expenses tamped down, and revenues set to get a lift.
His favorites names: Bank of America (BAC -2.2%), Citigroup (C -1.9%), CIT Group (CIT -1.6%), and Goldman Sachs (GS -2.2%)
Bank insiders have been selling stock at an unusually strong pace into the massive post-election rally, according to InsiderScore. Should the current trend hold, quarterly records will be set for both the number of people selling, and the dollar value of shares sold (data goes back to 2003).
InsiderScore's Ben Silverman tells the WSJ's Heard on the Street he's seeing a similar selling pattern for industrial names (NYSEARCA:XLI) as well - a sector which has also seen a big move since Nov. 9.
Heard's Steven Russolillo notes some bank insiders may be taking advantage of the first serious rally in a long time to exercise options that they've held for years, and are close to expiration.
There are multi-year highs again across the sector as interest rates continue to rise, but, maybe more importantly, bank investors begin to envision a far less heavy regulatory burden.
In a speech Friday described by FBR's Ed Mills as "going out swinging," Fed Governor Daniel Tarullo set himself up as the chief defender of the status quo, saying he doesn't see a "sound economic case" for rolling back the post-crisis regulatory regime.
Whether anyone hears him much going forward is a different story, given names like former BB&T boss John Allison or former FDIC chief Thomas Hoenig being thrown around as possible Fed vice chairmen for bank supervision. Both Allison and Hoenig are fans of following simple leverage ratios, but Tarullo says just focusing on those is "inadequate and dangerous."
Tarullo's voice will also have to rise above that of Trump's Strategic and Policy Forum led by Blackstone's Stephen Schwarzman.
Bank of America (BAC +2.6%), Wells Fargo (WFC +1.4%), JPMorgan (JPM +1.6%), Citigroup (C +2.3%), Goldman Sachs (GS +2.1%), U.S. Bancorp (USB +1%), Regions Financial (RF +1.5%), Synovus (SNV +1.1%), SunTrust (STI +1.4%), Primerica (PRI +2.1%), Bank of New York (BNY +1.4%), State Street (STT +1.1%)
Individual issues: Bank of America (BAC -1.8%), Morgan Stanley (MS -1.2%), Citigroup (C -1.9%), M&T (MTB -1.1%), Flagstar (FBC -1.7%), Fifth Third (FITB -1.6%), PNC Financial (PNC -1.4%), Prudential (PRU -1.1%), Lincoln National (LNC -1.9%), Schwab (SCHW -2.1%), State Street (STT -1.8%)
No longer part of the financial sector as far as the GICS classification, REITs are enjoying the respite in rates. IYR +1.6%, VNQ +1.6%
Realty Income (O +4.1%), Vereit (VER +3%), Omega Healthcare (OHI +3.2%), Welltower (HCN +3.5%), HCP (HCP +2.7%), Universal Health (UHT +4.4%), W.P. Carey (WPC +2%), Lexington Realty (LXP +2.5%), Essex Property (ESS +1.2%), Aimco (AIV +1.5%), General Growth (GGP +2.6%), Brixmor (BRX +1.6%), Federal Realty (FRT +1.8%), Kimco (KIM +1.2%), Public Storage (PSA +1.4%), Life Storage (LSI +1.4%), Boston Properties (BXP +1.2%), Stag Industrial (STAG +2.4%).
The 10-year Treasury yield is up another seven basis points to 2.46%, and bank investors continue to wrap their arms around the idea that real regulatory loosening is on the way. The XLF is higher by 1.7% vs. the S&P 500 being flat. KBE +2.15%, KRE +2%.
Bank of America (BAC +3%), Citigroup (C +1.7%), JPMorgan (JPM +2.2%), MetLife (MET +2.2%), Voya Financial (VOYA +3.3%), Northern Trust (NTRS +3.5%).
Oil is now ahead 4.6% to $51.72, helping the XLE to another 2.1% advance.
Tech (QQQ -1.4%) continues to struggle. Its decline today puts it lower by 1.1% since the election vs. the S&P's 2.8% advance, a 10% gain for the XLE, and a 14.5% move for the XLF.