Wall Street Wants To Know If The Fed Will Boost Bank Stocks

Dow Jones stock Goldman Sachs (GS) rose Monday ahead of this week's Federal Reserve monetary policy meeting, which could give bank stocks a boost.


The Fed is widely expected to raise interest rates by a quarter point on Wednesday, when the two-day Federal Open Market Committee meeting wraps up. Wall Street will be closely monitoring Fed Chairman Jerome Powell's press conference for any indication on whether officials expect a fourth rate hike this year.

Banks' profit margins tend to increase when rates rise. But concerns about the flattening Treasury yield curve, which is at its flattest levels since before the 2007 recession, have recently pressured the big banks' stocks.


Banks ranked No. 13 out of the 33 sectors tracked by IBD. The sector is up about 9% this year. Drill down further into industry groups, and you'll find that superregional and West/Southwest banks fare best at No. 48 and No. 75, respectively. Money-center banks — which are the big banks like Citigroup (C), Morgan Stanley (MS) and Dow stock JPMorgan (JPM) — lag at No. 169.


Below are five bank ETFs, in order of asset size:


1. SPDR S&P Regional Banking (KRE), with $5.3 billion in assets, tracks the S&P Banks Select Industry Index. It's hovering just below a 65.43 buy point it cleared on Friday. Top holdings as of Friday included SVB Financial Group (SIVB), Texas Capital Bankshares (TCBI), Cullen/Frost Bankers (CFR), East West Bancorp (EWBC) and First Republic Bank (FRC), according to Morningstar Inc.


2. SPDR S&P Bank (KBE) tracks the S&P Banks Select Industry Index, which is composed of asset management and custody banks, diversified banks, regional banks and other financial service providers. The $4.1 billion fund is slightly below a 50.98 buy point of a shallow cup with handle. SVB Financial, Cullen/Frost, Texas Capital, Synovus Financial (SNV) and East West Bancorp (EWBC) were its top five holdings.


3. First Trust Nasdaq Bank (FTXO) is trying to shaping the right side of a flat base. The buy point for now is 32.54. The $1.4 billion fund, which tracks the Nasdaq U.S. Smart Banks Index, offers exposure to regional and big banks. Its top five holdings: Fifth Third Bancorp (FITB), Regions Financial (RF), JPMorgan, PNC Financial Services Group (PNC) and Citigroup.


4. PowerShares KBW Bank Portfolio (KBWB) ($1.2 billion) tracks the KBW Nasdaq Bank Index. Its top five holdings were JPMorgan, U.S. Bancorp (USB), Bank of America (BAC), Citigroup and Wells Fargo (WFC). KBWB is working on a flat base.


5. IShares U.S. Regional Banks (IAT) ($955.7 million) tracks the Dow Jones U.S. Select Regional Banks Index and counts U.S. Bancorp, PNC and BB&T (BBT) among its top holdings. IAT is building the right side of a flat base with a 54.84 potential entry.