Major U.S. banks posted solid gains as traders bet that the Fed was likely to nudge interest rates higher in December or even at its next policy meeting in September. Federal Reserve chief Janet L. Yellen said last week that the case for raising rates was strengthening, given the improvements in the economy.
Raising interest rates from their rock-bottom levels, where they have been since the 2008 financial crisis, could be a good thing not only for markets but also for savers, said Rob Lutts, chief investment officer of Cabot Wealth Management in Salem, Mass.
“We're running out of excuses not to raise interest rates,” Lutts said. “We're the wealthiest economy on the planet, and everybody who has a bank account is earning virtually zero on those balances today. There's a lot of spending power that may be released in the economy” if savers earn more on their bank accounts, Lutts said.
Shares of Wells Fargo, the nation's largest mortgage lender, climbed 2.2% to $49.56 and JPMorgan Chase rose 1.1% to $66.95. Banks are still one of the worst-performing sectors in the market this year. The financial sector of the S&P 500 has gained just 1.8% in 2016 versus a 6.7% increase for the broader index.
Herbalife climbed 4.6% to $63.30 after Carl Icahn, the company's largest shareholder, said Friday that he bought more shares in the Los Angeles maker of nutritional supplements and that he never gave an order to sell his $1-billion stake. A Wall Street Journal report earlier Friday had said that the investment bank Jefferies had been looking for buyers for Icahn's position.
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