Financial stocks get some relief as Treasury yields rise, oil price surge pauses

• Financial stocks bounced up in afternoon trading on Tuesday after Treasury yields rose and crude oil, though still high, eased off its peak of $130/barrel level touched on Monday.
• Higher Treasury yields bode well for bank earnings as they make much of their profit on net interest income. 10-year Treasury yield rose 10 basis points to 1.87%, approaching its 1.89% level reached on March 3.
• Even with elevated anxiety over oil prices and the Ukraine war's potential effects on the global economy, traders are still expecting the Federal Reserve to boost its benchmark interest rate by 25 basis points, according to CME's FedWatch Tool. That, too, is good news for banks, which have been dealing with a rate of almost zero for two years.
• By individual names, Wells Fargo (WFC +2.7%), Truist Financial (TFC +2.3%), Bank of America (BAC +1.5%), and KeyCorp (KEY +2.3%) are among the strongest performers.
• All of the custodian banks — Bank of New York Mellon (BK +1.7%), State Street (STT +2.4%), and Northern Trust (NTRS +1.8%) are rising solidly.
• European banks, which sank the most with the start of the Ukraine war, are bouncing up the most in Tuesday trading as Deutsche Bank (DB +8.3%) and Banco Santander (SAN +7.7%) exhibiting double-digit gains. Lloyds Banking Group (LYG +6.4%), UBS Group (UBS +7.7%), Credit Suisse (CS +6.2%), and Barclays (BCS +5.3%) are also rising strongly.
• Life insurance firms Lincoln National (LNC +4.3%), Aegon (AEG +6.8%), Brighthouse Financial (BHF +3.1%), and Prudential Financial (PRU +3.0%) climb.
• Investors had been avoiding the risk of growth stocks, particularly fintech, in recent weeks. Now they appear to be picking up some bargains. Block (SQ +3.9%), Upstart Holdings (UPST +3.0%), PayPal Holdings (PYPL +3.6%), Lightspeed Commerce (LSPD +3.6%), Paysafe (PSFE +3.1%), Affirm Holdings (AFRM +3.6%), and SoFi Technologies (SOFI +2.0%) are all firmly in the green.
• And while financial stocks have bounced up, most are still lagging the S&P 500 in the five-day horizon. For example, the SPY has fallen 1.7% in the past five sessions, but only Citigroup (C -0.5%), down 0.59%, has outperformed the broader index as seen in the chart below.
• SA contributor Stephen Simpson sees asset sensitivity, loan growth, and operating leverage driving improving sentiment for Wells Fargo (NYSE:WFC)