This article is not a recommendation and is intended for educational purposes only.
Everyone’s worried about higher interest rates. Everyone except the banks, that is.
The SPDR S&P Regional Bank ETF (KRE) has advanced 5 percent in the last week, outpacing the S&P 500 and all of its key sectors by a wide margin. The rally has placed the index back above its 50-day moving average for the first time in over a month.
Breadth has also been improving in the group, with RadarScreen® showing 114 of 119 stocks in the portfolio rising over the last five sessions. In contrast, less than half the S&P 500’s members are positive during the same period.
The gains follow an earnings season with several companies like Bank of America (BAC), SunTrust Banks (STI) and Regions Financial (RF) beating estimates. But the real catalyst seems to be surging bond yields, which promise to boost the industry’s profit over the longer term. Companies in the sector also trade at relatively low multiples compared with a decade ago. This contrasts with Technology stocks like semiconductors. Is money rotating out of tech and into financials?