Bank Stocks Rally, Traders Sigh With Relief
Financial stocks are viewed as an economic health barometer, with traders traditionally looking to these stocks to lead a sustainable market rally. The trigger for this week's gains: bank stress tests that were released after Thursday's close and which -- unsurprisingly -- most of the mega-cap banks passed easily, implying dividend growth would soon resume.
Berstein Research senior analyst Brad Hintz said the stress tests implied Goldman Sachs
Compared to the 2013 stress test, the impact was modestly worse for Goldman Sachs, slightly better for Morgan Stanley and better for State Street and BNY Mellon
Other "risk-on" indicators are also clear in markets. Check out the gold price below, which jumped earlier this month as fears around geopolitical risk in Europe and the outlook for Chinese growth shook sentiment, causing a retreat to safe-havens. Gold prices have since nosedived as the threat of military action in Ukraine fades and economic data points to the ongoing U.S. recovery.
In other commodities, iron ore is flat-lining as the market cautiously assesses China's growth trajectory. The Shanghai Composite had its biggest one-day gain since mid-November on Friday, up 2.72% after speculation the government is loosening funding rules for property developers and banks to help economic growth. Nevertheless, the index is still viewed as a "casino" by many fund managers who are sticking to the Hang Seng or Chinese stocks listed on developed exchanges.
Meanwhile, Russian big-cap stocks are clawing back gains after its swoon on Ukraine tensions and sanctions against it after its bid to annex the Crimea region. Some fund managers suggest Russia has ruined its reputation with global investors, who will now seek other emerging markets with less geopolitical risk.
And U.S. stocks continue their ascent -- the Dow and the S&P up 2% for the week as the S&P narrowly holds a new intraday high.
-- By Jane Searle in New York