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Financial Sector Catches a Rate Hike Tailwind on December 4

Renee Blakely

Monetary Policies, SPY, and EWU Fly High on US Jobs Report

(Continued from Prior Part)

Sector performances

Stocks across all the component sectors of the SPDR S&P 500 ETF (SPY) soared on Friday, December 4, following the announcement of the strong US employment situation. The graph below illustrates the percentage changes in the performances of SPY’s sectors as of December 4.

Financial sector in the lead

Among the above sectors, the financial sector gained the most on December 4 as the prospects of the rate hike increased following the day’s jobs report. Increased lending and borrowing rates generally benefit banks and the financial institutions because the margin between deposit rates and lending rates rises.

For this reason, the Financial Select Sector SPDR ETF (XLF) went up by 2.7% on December 4. Perhaps most notably, Capital One Financial (COF) gained by 2.6%.

Meanwhile, banks into investment and brokerage such as Goldman Sachs (GS) and Morgan Stanley (MS) climbed by 2.6% and 2.5%, respectively, and regional banks such as KeyCorp (KEY), PNC Financial Services Group (PNC) went up by 3.6% and 3.6%, respectively, on December 4.

Other sectors

Except for the energy sector, all other sectors rallied on December 4. The technology sector went up by 2.5% on the day. Metals and mining stocks rose as well on the day while the industrial and the material sectors jumped by 1.5% and 1.8%, respectively.

Specifically, material stocks including Newmont Mining (NEM), Nucor (NUE), Owens-Illinois (OI), Alcoa (AA), and Ball (BLL) returned 9.2%, 0.5%, 2.1%, 3.9%, and 2.8%, respectively, on December 4. Among these stocks, only NEM, AA, and BLL traded at prices above their respective 100-day, 50-day, and 20-day moving averages. We should note that when a stock price settles above its moving average, it suggests an uptrend in the stock’s movement. But many stocks from the materials sector suffered on account of falling demand and plunge in the commodity prices.

Now let’s look at the energy sector performance on December 4.

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