Bank stocks have risen 10 per cent since the start of the month as benchmark yields climbed enough to make lending and trading more profitable.
“What’s giving the financials a little boost is a more positively sloped yield curve, which means better profit for them,” said Joseph Battipaglia, market strategist at Stifel Nicolaus in Yardley, Pennsylvania.
Yields reached a six-month high this week after the initial deal reached in Washington to extend tax cuts fuelled concern about inflation and the government’s debt burden.
JP Morgan Chase & Co gained 2.6 per cent to $40.27. The KBW Bank index climbed 2.9 per cent.
By the same token, the higher bond yields capped gains on the major stock indexes as they make it more expensive for consumers and businesses to borrow, while stocks and the dollar have moved in opposite directions of late. A rise in yields and the dollar could also draw money away from equities.
Technology shares helped lift the Nasdaq, led by semiconductor stocks after solid outlooks from Texas Instruments and Novellus Systems.
Texas Instruments gained 1 percent to $33.75 while Novellus climbed 2 per cent to $32.40. The PHLX Semiconductor index rose 1 per cent.
On the Dow, McDonald’s was the biggest drag, falling 2 per cent to $78.74 after reporting weaker-than-expected global sales for November.
The Dow Jones industrial average gained 13.32 points, or 0.12 per cent, to 11,372.48. The Standard & Poor’s 500 Index gained 4.53 points, or 0.37 per cent, to 1,228.28. The Nasdaq Composite Index gained 10.67 points, or 0.41 per cent, to 2,609.16.
The S&P faces resistance at the 1,228 level, which represents the 61.8 per cent Fibonacci retracement of the 2007-2009 bear market slide, a key technical indicator.
Some analysts expect the market to trade sideways for a few days before moving upward into the year’s end.
Bob Doll, chief investment strategist at BlackRock, said the deal to extend the Bush-era tax cuts should accelerate the move of cash into equities and out of fixed income.