Wall Street kicked off the week with a rally in financial stocks, fueled by upbeat bank earnings and renewed risk appetite following Donald Trump's surprise decision to exempt new tariffs on critical tech products from China.
The Financial Select Sector SPDR Fund
The sector needs to climb another 4% to fully recover the losses it incurred after the April 2 tariff announcement.
Goldman Sachs Delivers A Strong Beat
The improved sentiment in financial sector's rally was led by Goldman Sachs Group Inc.
For the first quarter of fiscal 2025, Goldman posted earnings per share of $14.12, up from $11.58 a year ago and well ahead of the $14.761 billion revenue consensus. Key revenue drivers included equities trading, which brought in $4.19 billion versus an expected $3.8 billion, and net interest income of $2.90 billion, comfortably above the $2.28 billion forecast.
The firm also announced a massive share buyback authorization of up to $40 billion, sending a strong signal of confidence in its balance sheet and forward earnings power. Loans reached $210 billion, topping the $197.61 billion estimate, while total deposits rose 8.8% quarter-over-quarter to $471 billion.
CEO David Solomon says geopolitical volatility remains a headwind but struck an optimistic tone on trade policy. "I'm encouraged by Trump's more gradual tariff process," he added.
Broader Earnings Strength Buoys Sector
Stronger-than-expected results last Friday from JPMorgan Chase & Co.
JPMorgan maintains its 2025 net interest income guidance despite macroeconomic headwinds tied to trade and inflation.
Goldman analyst Richard Ramsden found this encouraging.
"JPM continues to be in strong strategic position for a wide range of economic conditions," Ramsden said, highlighting the bank's "best-in-class capital ratios and reserves," Ramsden said in a note. He added that if the economy weakens, JPM should trade defensively, and if the outlook improves, the bank is likely to continue gaining market share.
Traders Eye Technical Breakout In Financials
The breakout in the XLF fund above its 200-day moving average could signal further gains ahead.
This level, long watched by technical analysts as a line between bullish and bearish territory, was last crossed from below to above in November 2023. Over the following one and two months, the sector gained 6.2% and 11.8%, respectively.
Key Gainers And What's Ahead
Banking and insurance names led Monday's charge. Among the top gainers in the XLF ETF:
- Citigroup Inc.
(C ) rose 3.6% to $63.86 - MetLife Inc.
(MET ) added 2.8% to $73.41 - Morgan Stanley
(MS ) gained 2.8% to $111.15 - Prudential Financial Inc.
(PRU ) advanced 2.76% to $101.56 - Globe Life Inc.
(GL ) climbed 2.56% to $122.56
Strong numbers from these names could reinforce the bullish momentum in financials and potentially extend the rally through the week.
