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Bank stocks are saying it's more likely that Federal Reserve officials will decide to increase interest rates in a few weeks.
Over the last two weeks, Goldman Sachs, JPMorgan Chase and Wells Fargo saw stock prices appreciate at an accelerated pace compared to that of the . That's even factoring in financials' decline Thursday.
It's making some Fed-watchers think the market is finally ready to see rates rise again. Between reassuring data including retail figures and home sales, economists and analysts are yet again revising predictions about what the Federal Open Market Committee will do, and when.
"It's making markets think the Fed can go sooner," Deutsche Bank chief U.S. economist Joe LaVorgna said. "The likelihood of more than one move has increased."
It comes at a crucial time for Wall Street. Bank CEOs are practically begging FOMC representatives to lift interest rates for only the second time in nearly a decade; analysts and even Bank of America CEO Brian Moynihan said the company faces difficulty matching targets, raising the prospects of further job cuts if the Fed doesn't follow through with interest rate increases.
There's a lot that has happened since the Fed's April meeting that is likely to change central bankers' minds. The price of oil has rebounded 57 percent from its low point this year. Erik Oja, U.S. banks analyst with S&P Global Market Intelligence, said the rebound could stave off failures of energy companies that have forced Wall Street firms to bolster reserves to offset loan losses.
The year began with most economists expecting at least three, and possibly four, rate hikes for 2016. Market turbulence to kick off 2016 scotched that notion, and the FOMC decided in March and April that it would not hike rates. The prospect of three rate hikes means banks could still benefit on their massive cash balances, which would make them billions of dollars in interest, especially if rates continue to rise.
"We saw that helped in first-quarter earnings," Oja said. The Fed expressing signs of confidence about the U.S. economy via a rate hike bodes well for banks in the long run, he added.
Other indicators seem to support the idea that the FOMC is leaning closer to boosting rates June 15; the U.S. dollar has been rising against other currencies this week, as well. CME Group's FedWatch tool, which tracks the probability of a rate hike, showed a strong increase in sentiment that the central bank will raise its target rate from the current range of 0.25-0.50 percentage points. As of early Thursday, the probability for a June hike was at 30 percent, a sharp increase from just 4 percent a few weeks ago.
It has been good news for investors in bank stocks in the European Union as well, where banks' share-price gains have topped that of even Wall Street firms in the last two weeks.
Banks including Barclays and the Royal Bank of Scotland watched shares notch double-digit percentage gains over the month of May. As the probability of a Brexit declines — something expected to be an operational and regulatory headache for banks, were it to pass a vote in the U.K. next month — some bank stocks rose this week by as much as 10 percent or more on the other side of the Atlantic.
"Pulling out [of the U.K.] would cause a lot of operational difficulties for banks," Oja said.