Financials ETF Hits Record High After Bank Earnings

The Financial Select Sector SPDR Fund (XLF) gained 0.8% on Tuesday, hitting record highs following the release of a handful of bank earnings reports.

Shares of Bank of America surged more than 5% after the company reported earnings that topped analyst estimates.

“BofA’s guidance for $14.5 billion of net interest income in 4Q is slightly above consensus ($14.3 billion), suggesting a firmer run rate entering next year, with rate cuts and loan growth factored into its view after 2Q met its guidance,” Bloomberg analyst Alison Williams wrote.

Bank of America has close to a 5% weighting in XLF, making it the fifth-largest holding for the ETF behind Berkshire Hathaway, JPMorgan Chase, Visa, and Mastercard.

Meanwhile, shares of PNC Financial Services rose by 4% following the release of its latest earnings report, while Morgan Stanley’s stock edged higher by 0.5%.

Morgan Stanley “posted strong investment banking and trading results which were primary drivers of the better-than-expected EPS in the quarter,” RBC Capital Markets analyst Gerard Cassidy wrote.

Schwab Shares Sink on Slowing Deposits

On the other hand, Charles Schwab shares plunged 9% on Tuesday after the company reported lower growth in customer deposits than expected.

“Schwab’s path to a swifter net interest margin rebound and earnings expansion is being delayed by a below-target organic growth and slipping bank deposits,” Bloomberg analyst Beil Sipes wrote.

“Trends should improve in 2H, but timing remains unclear as the US Federal Reserve’s rate-cut path plays a role,” he added.

Schwab has a 2% weighting in XLF, while the aforementioned PNC and Morgan Stanley have weightings of 1.1% and 2.2%, respectively.

In addition to the latest earnings reports, bank stocks have been moving this week on speculation that a potential Trump presidency could lead to an environment of fewer regulations.