Here's Why Big Bank Stocks Climbed Today

Shares of the country’s largest banks—including Bank of America (NYSE:C) , Citigroup (NYSE:C) , Wells Fargo (NYSE:WFC) , and JPMorgan Chase (NYSE:JPM) —gained on Wednesday, helping lift indexes that were otherwise battered by an industry-wide slump in tech stocks.

Banks are starting to pick up momentum on the back of two key forces in Washington D.C. First, the entire financial sector—which witnessed huge gains after the election of Donald Trump’s surprise election victory last year—has surged as Republicans continue to make progress on their tax reform bill.

After a luncheon with President Trump on Tuesday helped convince two previously on-the-fence budget committee members to approve the bill, GOP leaders now expect the reform package to see a final vote on the Senate floor as soon as later this week.

The bill would slash the corporate tax rate from 35% to 20%, which should help the bottom lines of large businesses like the aforementioned banking behemoths.

Maybe more importantly, investors were pleased with the testimony of Fed chair nominee Jerome Powell this week.

Powell—President Trump’s pick to succeed Janet Yellen as the head of the Federal Reserve—all but confirmed that the central bank is on track to raise interest rates at its next policy meeting in December. The nominee also suggested that deregulation might be necessary in today’s banking industry (also read: 5 Bank Stocks to Buy on Jerome H. Powell Testimony).

Finally, rising yields and Brexit related news could be playing into today’s banking rally. The U.S. 10-year Treasury yield was up more than 2.3% on Wednesday, alleviating some worry about a weaker economic outlook and lifting financials that hold credit balances. Meanwhile, the U.K. and E.U. appear close to agreeing to a Brexit deal, which could ease concerns about U.S. banks with large footholds in London.

Shares of JPMorgan, Bank of America, Wells Fargo, and Citigroup were all up slightly more than 2% in early afternoon trading hours Wednesday. JPMorgan’s gains helped lift the Dow into the green, while the entire banking rally protected the S&P 500 index from the tech selloff.

The tech-heavy Nasdaq Composite Index was down nearly 1.3%, providing evidence to the theory that investors may finally be cashing out of the red-hot sector. Tech has dominated Wall Street throughout 2017, but after a relatively strong Q3 earnings season for the industry giants, it could very well be profit taking time.

It is also worth noting that large funds are beginning their rebalancing process as we approach the end of the month, so we could be seeing the effects of some serious money moving around. What’s more, several geopolitical sagas—most notably the North Korean regime’s latest missile test—could be inspiring investors to move to more “tried-and-true” sectors.

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