Bank stocks surge after inflation report, regional banking ETF logs biggest gain since May

U.S. bank stocks jumped as U.S. Treasury yields tumbled after fresh data Tuesday from the consumer-price-index showed headline inflation was flat in October. Regional banks had been hammered earlier this year on investor worries that elevated Treasury yields were pressuring their balance sheets, after Silicon Valley Bank collapsed in March.

While Treasury yields fell Tuesday, they remain up so far this year in the wake of the Federal Reserve aggressively raising its benchmark interest rate to tame the hottest inflation in decades. The annual pace of inflation ran as hot as 9.1% in June 2022, as measured by the consumer-price index.

Inflation has fallen from its 2022 peak, with the consumer-price index showing further signs of easing in October. The rate of headline CPI data slowed year over year to 3.2%, from 3.7% in the 12 months through September, according to a report Tuesday from the Bureau of Labor Statistics. The Fed has been aiming to bring inflation down to its 2% target.

Meanwhile, the yield on the 10-year Treasury note
BX:TMUBMUSD10Y
fell 19.1 basis points on Tuesday to 4.440%, its biggest daily drop since March 10 based on 3 p.m. Eastern Time levels, according to Dow Jones Market Data.

The top three holdings of the SPDR S&P Regional Banking ETF on Nov. 13 were Truist Financial Corp.
TFC,
+5.55%,
First Horizon Corp.
FHN,
+7.50%
and M&T Bank Corp.
MTB,
+5.51%,
according to data on the website of State Street Global Advisors. 

Invesco KBW Bank ETF’s biggest holdings on that same date included Goldman Sachs Group Inc.
GS,
+3.61%,
JPMorgan Chase & Co.
JPM,
+1.82%,
Wells Fargo & Co.
WFC,
+3.21%,
Bank of America Corp.
BAC,
+5.49%,
Morgan Stanley
MS,
+4.36%
and Citigroup Inc.
C,
+3.89%,
portfolio data on Invesco’s website show.

Goldman shares closed 3.6% higher on Tuesday, ranking among the best-performing stocks in the Dow Jones Industrial Average in the trading session, according to FactSet data. 

The U.S. stock market rose sharply Tuesday, with the Dow
DJIA
jumping 1.4% while the  S&P 500
SPX
climbed 1.9% and the Nasdaq Composite
COMP
advanced 2.4%, according to FactSet data. 

Tuesday’s big gains for bank ETFs weren’t close to erasing losses seen so far this year.

The SPDR S&P Regional Banking ETF remains down around 24% in 2023, while the Invesco KBW Bank ETF has slumped almost 19% year to date, according to FactSet data.