Bove: Don't fear the Fed for bank stocks

How the Fed rate hike affects the stock market

Banks are likely to be the bellwether of how financial markets accept rising interest rates, so it's not surprising to see the sector take a hit as of late.

Investors bailed on the group last week as the market anticipated a Federal Reserve rate hike Thursday, only to see the U.S. central bank again back off a move. Banks were the worst-performing sector for the week, collectively losing about 2.5 percent.

Analyst Dick Bove thinks the selloff was a mistake.

"Right now the values in bank stocks are incredibly high," the vice president of equity research at Rafferty Capital Markets told clients in a note Monday. "Major commitment of funds to the sector makes sense."