Financial and bank stocks rallied Wednesday following President-elect Donald Trump's decisive win over Vice President Kamala Harris in Tuesday's election. Goldman Sachs (GS) and JPMorgan Chase (JPM) led the way among Dow Jones stocks and among bank breakouts, along with Wells Fargo (WFC). Credit-card companies Discover Financial Services (DFS) and Capital One Financial (COF) also spearheaded gains among S&P 500 stocks.

Financial Stocks Rally On Hopes For Regulatory Rollbacks

The rally for bank stocks hinged on several drivers:

• Investors seemed to bet that a second Trump term would mean less burdensome regulations, more corporate deals and more domestic investment for the banking sector.
• Further, rising stock markets and unwinding of the antitrust crackdown under President Joe Biden could sweeten profits for U.S. banks and stock brokers.
• Treasury yields soared following the election. The 10-year Treasury yield neared 4.5%, a better than three-month high as investors anticipated economic growth, tax cuts and increased fiscal spending. Higher bond yields bode well for banking sectors, which are generally heavily vested in bond purchases and holdings.

Bank Stocks Break Out, Bank ETFs Hit Highs

The SPDR S&P Bank ETF (KBE), tracking a range of stocks from the S&P Banks Select Industry Index, gapped up 10% in Wednesday's stock market action. Shares of Bank of America (BAC), Morgan Stanley (MS) and Charles Schwab (SCHW) shot up 5%-10% each. IBD 50 stock Interactive Brokers (IBKR) surged about 10%.

Among bank stocks breaking out, Citigroup (C) topped a 67.81 buy point on Wednesday. It is in buy range to around 71. JPMorgan Chase stock regained a 225.48 entry from a cup base and grew quickly extended, meaning shares are no longer in a proper buy zone. JPM stock, a recent IBD Stock of the Day after robust earnings, leapt up almost 10% to a record high on Wednesday. Goldman Sachs stock punched up almost 13%, clearing a 540.51 trigger.

The Financial Select Sector SPDR ETF (XLF) advanced more than 5%. Credit card firms Discover and Capital One shot up more than 14% apiece, leading the financial stocks fund higher. Private-label card issuer Synchrony Financial (SYF) skyrocketed nearly 18%.

The SPDR S&P Regional Bank ETF (KRE), which follows smaller bank stocks, surged more than 11%. Shares of top holdings Western Alliance Bancorp (WAL), Regions Financial (RF) and Huntington Bancshares (HBAN) all popped between 8% and 12%.

Each of the SPDR financial and bank stock exchange traded funds hit 52-week highs.

On Thursday, the Fed will announce its next move on interest rates. Market watchers expect policymakers to cut interest rates by a further quarter point.

The Fed's prior reduction by 50 basis points in September marked the first cut in about four years.

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