Stocks rise as higher rates lift bank shares

Stocks rose slightly, erasing earlier losses, as bank shares gained along with U.S. Treasury yields.

The Dow Jones Industrial Average traded just above the flatline while the S&P 500 climbed 0.1%. The financials sector gained 0.5%.

Shares of Citigroup and Bank of America rose 0.3% and 0.8%, respectively, while J.P. Morgan Chase and Wells Fargo both rose at least 0.3%. The benchmark 10-year yield traded higher at 2.52% while the 2-year rate rose to 2.33%.

Yields and banks rose after Federal Reserve Chairman Jerome Powell said Wednesday that recently low inflation pressures may just be “transitory,” hinting that a rate cut may not be on the horizon. Powell’s comments sent stocks tumbling in the previous session, with the Dow closing more than 150 points lower.

“I think investors need to get into their heads that the period of low inflation, low interest rates and monetary policy continuing to provide nothing but stimulus is over,” Abby Joseph Cohen, senior U.S. investment strategist at Goldman Sachs, told CNBC’s “Squawk on the Street. ” “Markets instead should be looking at the economy and profits. It’s a good picture and one we think makes sense.”

Powell’s comments followed the Fed’s decision to leave rates unchanged, citing lackluster inflation. Ahead of the meeting, President Donald Trump had asked the central bank to cut rates and increase stimulus.

The Nasdaq Composite outperformed the Dow and S&P 500 on Thursday, rising 0.4% on the back of strong gains from Tesla.

Tesla shares rose more than 3% after the company unveiled a plan to raise up to $2 billion, with $1.35 billion coming from convertible bonds. The remaining $650 million would come from new equity, which includes a $10 million purchase by CEO Elon Musk.

CNBC

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Ed Moya

Ed Moya

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya