Victor Reklaitis, Ryan Vlastelica
Markets have been in an uptrend since November’s presidential election, with the bulk of these gains coming from the financial sector as investors have bet it would benefit from deregulation under President-elect Donald Trump’s incoming administration and an environment that is expected to see rising interest rates.
The strength of the rally—the financial sector is up about 17% since the election—could have left stocks vulnerable if the results disappointed.
J.P. Morgan Chase & Co. JPM, +1.68% reported earnings and revenue that surged past expectations, helped by its trading division, while earnings at Bank of America Corp. BAC, +1.68% rose 43%. On the downside, Wells Fargo & Co. WFC, +2.38% reported weaker-than-expected earnings and revenue in its first full quarter of results since its sales-tactics scandal erupted in September.
All three stocks rose more than 1% while the Financial Select Sector SPDR ETF XLF, +1.50% rose 0.9%.
Wayne Kaufman, chief market analyst at Phoenix Financial Services, said the results proved that the sector’s postelection rally had been warranted.
“J.P. Morgan had a terrific beat; BofA, a very nice one,” said Kaufman. “You’d have to believe that the economy will be lackluster going forward to think that banks won’t do well from here. Their valuations are still good, because they have more earnings power than investors are giving them credit for.”
The Dow Jones Industrial Average DJIA, +0.22% rose 40 points, or 0.2%, to 19,929 while the S&P 500 SPX, +0.33% added 5 points to 2,275, a rise of 0.2%. The Nasdaq Composite Index COMP, +0.57% climbed 19 points, or 0.3%, to 5,567.
For the week, the Dow is down 0.1% and the Nasdaq is up 0.9%. The S&P is flat. U.S. financial markets will be closed Monday for Martin Luther King Jr. Day.
See also: Bank ETFs still favored as investors see growth and Trump bump ahead
In the latest economic data, U.S. retail sales rose 0.6% in December. Producer prices were up 0.3%.