The financial sector has quietly emerged as one of the market's top-performing areas, with several standout stocks offering particularly compelling setups. A mix of higher interest rates, strong economic growth and fair valuations have made financial services stocks popular additions to investors’ portfolios.

PennyMac Financial Services (PFSI) and Northern Trust (NTRS) are two finance stocks with especially convincing bullish catalysts. Both stocks boast Zacks Rank #1 (Strong Buy) ratings, fair valuations with bright growth prospects and strong momentum.

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Northern Trust: Stocks Breaking out Today

Northern Trust is a leading provider of wealth management, asset servicing, asset management, and banking solutions for institutions, affluent individuals, and families. Headquartered in Chicago and founded in 1889, it is known for its strong reputation for financial stability, client-focused services, and expertise in managing complex financial needs, particularly for high-net-worth clients and institutions.

Northern Trust has seen strong upgrades to its earnings estimates in recent months, giving it the coveted Zacks Rank #1 (Strong Buy) rating. Analysts have unanimously raised estimates across timeframes, with the current quarter earnings forecast rising 10.1% in the last 60 days. Earnings are projected to grow nearly 12% annually over the next three to five years, while the company is trading at a one year forward earnings multiple of 14.4x.

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What really drew me to the stock though is its technical setup. Northern Trust has been consolidating and breaking out over and over since the start of Q4, and today it is breaking out again. If NTRS stock holds above this breakout level, it should continue to rally.

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PennyMac Financial Services: Discount Valuation and Earnings Growth

PennyMac Financial Services is a leading mortgage lender and servicer in the US, specializing in residential mortgage loans and related services. The company operates across loan origination, servicing, and correspondent lending. Known for its technology-driven approach, PennyMac serves homebuyers, homeowners, and institutional clients, helping manage a significant share of the U.S. mortgage market.

PennyMac Financial Services also enjoys a Zacks Rank #1 (Strong Buy) rating, reflecting the unanimous upgrades to its earnings estimates. Furthermore, the company is trading at a bargain valuation of just 8.6x forward earnings, which is well below the industry average of 27.6x. PFSI is expecting some huge growth as well, with sales growth expected to climb 18.5% this year and 46.8% next year and earnings to jump 126.7% this year and 20.3% next year.

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PennyMac Financial Services also has a compelling technical setup forming. Over the last couple of months, PFSI stock has been building a bull flag with a clear level of resistance. If the stock can break out above the $104 level, it should make a major bull run. Alternatively, if it loses the $99 level of support, it may be worth waiting for another tactical opportunity.

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Should Investors Buy Shares in PFSI and TCBI?

Both PennyMac Financial Services and Northern Trust present compelling opportunities for investors seeking exposure to the financial sector. Not only is the sector broadly outperforming the market, but these individual names offer both growth and momentum on the upside and reasonable valuations limiting risk on the downside.

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Northern Trust Corporation (NTRS) : Free Stock Analysis Report

PennyMac Financial Services, Inc. (PFSI) : Free Stock Analysis Report

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