Yellen Puts A Crimp In Financial Rally

The Financial Select Sector SPDR Fund XLF rally over the past month has been put on pause this week after Fed Chair Janet Yellen gave some relatively dovish commentary in front of Congress this week. In her testimony, Yellen said interest rate hikes would be both gradual and limited in the near-term, sending stocks higher for the second day in a row.

However, bank investors were hoping that interest rates would continue to rise at a steady pace, allowing banks to expand their historically low net interest margins. Net interest margin is the difference between the interest rates charge for loans and the interest rates they pay out for deposits.

Related Link: Jim Strugger's Financial ETF Trade

In the wake of President Trump’s election back in November, the prospects of higher interest rates, corporate tax cuts and financial deregulation has resulted in the financial sector being one of the top-performing sectors of the market. The XLF is up 6.2 percent in the past three months, but fell 0.8 percent on a strong day for stocks on Tuesday.

The XLF lagged in early Wednesday trading as well, trading mostly flat on another up day for the broad market.

Bank investors were hoping that a blowout jobs report last Friday would be all Yellen needed to deliver relatively hawkish commentary to Congress this week. However, in the past two days, the XLF is down 0.6 percent, while the SPDR S&P 500 ETF Trust SPY is up 0.7 percent. The iShares Barclays 20+ Yr Treas.Bond (ETF) TLT is also up 0.8 percent so far this week.

Joel Elconin contributed to this report.

Image credit: Dustin Blitchok

Posted In: Janet YellenSector ETFsPoliticsFederal ReserveMarketsETFsGeneral

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.