Another Strong Day For Financials

The financial sector is up again today with the Financial Select Sector SPDR ETF (XFL) up 0.96% as of 3 p.m. New York time. This continues a strong May run for the sector that has seen the ETF climb 5.6% from May 3–after the sector spent there period from March 23 to May 3 building a base. In that same May 3 to today period the Standard & Poor’s 500 stock index is up 3.6%.

What’s behind the climb today and over the last two weeks?

Continued speculation that Congress and regulators will give the banking industry relief from the Volcker Rule’s ban on proprietary trading. On the regulatory relief front, the House of Representatives is expected to vote on loosening regulations under Dodd-Frank today or tonight.

A belief that yesterday’s acquisition of MB Financial (MBFI) by Fifth Third (FITB) is a signal that there are more acquisitions to come among small and mid-sized banks.

The return of a focus on the upward trend in interest rates, which would be good for net interest margins at banks.

And a recognition that with most sectors going nowhere, the financial sector is one of the best games in town.