Financials on Wednesday were the weakest performer among the S&P 500's 11 sectors after the Federal Reserve, lifted interest rates by a quarter-point. The S&P 500 index's /zigman2/quotes/210599714/realtime SPX +0.65% financial sector, was off 0.1%, with other sectors posting firm gains, led by energy's 2% rebound. A rate hike tends to be a positive for bank's, because it increases how much they can charge for borrowers, compared with their own short-term borrowing costs. However, U.S. government bonds slipped, as investors bought Treasurys, pushing yields lower. The yield on the 10-year Treasury note /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +1.58% was down to 2.50%, compared with 2.58% earlier in the session. Bond yields move inversely to prices and usually tick higher, as investor shed existing bonds in anticipation of higher yielding bonds in the future. Some market participants said the Fed wasn't as hawkish, or aggressive, about its plans for future rate hikes as had been anticipated. The Fed's dot plot or forecast of future rate increases is implying two more rate increases in 2017. matching its forecast for three in 2017. For 2018, the Fed is expected raise rates three times. Exchange-traded funds that track the financial sector also showed lackluster trade. The Financial Select Sector SPDR ETF /zigman2/quotes/209660484/composite XLF +1.01% was off 0.1%, tracking the S&P 500 financial sector, the SPDR S&P Bank ETF /zigman2/quotes/201006419/composite KBE +2.01% was off 0.3%, the iShares U.S. Financials ETF /zigman2/quotes/207031846/composite IYF +1.23% was up about 0.3%. Comparatively, the S&P 500 gained 1% at 2,388, the Dow Jones Industrial Average climbed 0.6% at 20,971, and the Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.16% rose 0.9% to 5,910, near a closing record. Shares of big banks like Goldnman Sachs Group /zigman2/quotes/209237603/composite GS +1.60% and Bank of America /zigman2/quotes/200894270/composite BAC -0.32% were showing losses, bucking the trend of the broader market.
Want to see how this story relates to your watchlist?
Just add items to create a watchlist now:
- XS&P 500 Index (SPX)
- XU.S. 10 Year Treasury Note (TMUBMUSD10Y)
- XFinancial Select Sector SPDR ETF (XLF)