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Bank stocks rally as investors hope more fiscal support from Democratic congress will aid financials

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  • Bank stocks rallied on Wednesday as investors hoped a Democratic congress will lead to more fiscal support that could aid the financials sector. 
  • Bank of America climbed 7.8%, Wells Fargo 8%,  JPMorgan 5.6%, and Citigroup 6.9%.
  • Wells Fargo banking analyst Mike Mayo told CNBC the Georgia runoff elections were the final event in the “Bank Stock Trifecta” that will push the sector higher.
  • “The reflation trade is back on, that should help the bank net interest margins, and to the extent there’s more spending, that can help mitigate the degree of credit losses,” Mayo told CNBC on Wednesday.
  • Visit Business Insider’s homepage for more stories.

Bank stocks rallied on Wednesday as investors hoped more fiscal support from a Democratic congress will provide a boost to the beaten-down financial sector.

Shares of Bank of America gained as much as 7.8% to $32.62 a share, while Wells Fargo gained as much as 8% to $33. JPMorgan‘s stock gained as much as 5.6%, and Citigroup grew 6.9% to as high as $66 during intraday trading.  The Financial Select Sector SPDR Fund (XLF) leaped as much as 5.2%. 

Wells Fargo banking analyst Mike Mayo told CNBC the Georgia runoff elections were the final event in the “Bank Stock Trifecta” that will continue to push the sector higher.

“The reflation trade is back on, that should help the bank net interest margins, and to the extent there’s more spending, that can help mitigate the degree of credit losses,” Mayo told CNBC on Wednesday.

Read more:Wall Street experts are calling Georgia’s runoff results ‘the first surprise of 2021.’ Here’s how 4 of them recommend positioning your portfolio for what could happen next.

The first event was “Pfizer Monday,” on Nov. 9, when Pfizer announced its vaccine was 90% effective in treating the coronavirus, Mayo said. The day propelled the bank sector and a number of other stocks that were hit hardest by the pandemic as investors began to see an economic recovery on the horizon.

The analyst said that since Pfizer Monday, bank stocks have outperformed the market by the largest margin in over a decade. The second event was in December, when the Federal Reserve allowed banks to buy back their shares. Wells Fargo estimates banks can buy back about 15% of their shares over two years with their existing excess capital.

In the last two months, bank stocks have soared. Citi is up the most, over 50% since Nov. 9 or Pfizer Monday.

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