The bombshell from the Republican platform is a proposal to reinstate the Glass-Steagall Act, the banking separation rule that was dropped during the Clinton administration after a bipartisan effort to overturn it. Trump's campaign manager told reporters Monday that the rule's reinstatement would be part of the party's platform, and that it would create barriers between the big banks' businesses and "try and avoid some of the crisis that led to 2008," according to reports.
"That would mean breaking away commercial and investment banking and that could have larger implications for the large banks and investment banks," said Dan Clifton, head of policy research at Strategas. "It doesn't mean it's going to go through but it's where Donald Trump wants to lead the party should he win election."
Clifton said the platform otherwise represents more traditional Republican positions, such as promoting fossil fuels and drilling and getting tough on national security and defense. It also includes stimulative tax proposals.
"The platform is very much traditional Republican sectors, outside the banking stuff. It's tough on the Federal Reserve, too," said Clifton. He said in contrast to the surprise on banking, Democrat Hillary Clinton so far proposes a transaction tax on Wall Street.
"The markets have two minds. We have been rallying post-Brexit because it is clear global policymakers are going to go for fiscal policy no matter who gets elected. But you also have this popularism," said Clifton.
Republican conventions are usually positive times for stocks, according to S&P data going back to 1948. "I think there could be a reaction," said Sam Stovall, chief equity strategist at S&P Global Market Intelligence.
"The S&P 500 was up nearly two-thirds of the time during Republican conventions and then up 53 percent of the time in the week after," he said
Two of the three worst stock market performances during Republican conventions were the last two, according to the data. The worst was the 3.6 percent decline during the convention of Sen. John McCain and former Alaska Gov. Sarah Palin, when the financial crisis was in full swing. The 0.8 percent S&P decline during the 2012 convention of Mitt Romney and Rep. Paul Ryan was the third worst during a GOP convention. The second worst was the 1 percent decline during the convention of Gerald Ford in 1976.
Stocks don't fare as well during Democratic conventions, according to the S&P data. "The market was down 53 percent of the time during Democratic conventions, and then down 57 percent of the time five days later," he said. Democrats meet in Philadelphia next week for their convention.
The market performance during the last two conventions of President Barack Obama was the best for all Democratic conventions going back to 1948. The S&P was up 2.7 percent during the week of the 2008 convention, and it rose 1.8 percent during the 2012 convention.
Stocks were higher on the first day of the GOP convention Monday, with the Dow and S&P 500 both hitting new highs. The Dow was up 16 at 18,533, and the S&P 500 rose 5 to 2,166. After the bell, earnings put a big dent in Netflix shares as subscriber numbers disappointed. IBM rose more than 2.5 percent in extended-hours trading on its earnings beat.
Besides Goldman Sachs, earnings are also expected Tuesday from Microsoft, Johnson & Johnson, UnitedHealth, Lockheed Martin and United Continental, among others. There are also housing starts at 8:30 a.m. EDT.
Bank stocks have been winners lately on positive earnings news. Bank of America earnings helped drive its stock up 3.3 percent Monday, and Citigroup also gained, but JPMorgan closed slightly lower on the day. All three banks would look far different if Glass-Steagall were in place.
When the Depression-era rules were dropped in 1999, it cleared the way for banks like Citigroup and JPMorgan to expand into capital markets businesses they were barred from as banks. Trump has said he opposed Dodd-Frank, the bank rules adopted after the financial crisis, and some analysts had expected him to push to eliminate them and make life easier for the big banks.
But the surprise effort to bring back Glass-Steagall was instead seen as a populist move, aimed at the supporters of Bernie Sanders and Sen. Elizabeth Warren.
"We are supporting the small banks and Main Street. We talk about legislation that affects, you know, some of the mistakes made in repealing Glass-Steagall and some of the mistakes made in imposing Dodd-Frank. The platform reflects those things," Trump campaign chairman Paul Manafort told reporters Monday.
But there's little chance, there would be a reinstatement, analysts said. "The Republican in Congress seem to be going in one direction to solve what they perceive to be a major problem — Dodd-Frank. And the Republicans on the National Committee seem to be going in a different direction which is a direction the Democrats agree with," said Rafferty Capital bank analyst Dick Bove.
Bove said despite the disdain toward big banks, consumers have shown they want to keep their money in large institutions in bad times. "They like them because on a relative basis the cost of doing banking with a big bank is less than doing business with a small bank. We know the business models have not worked for what I'll call monoline businesses for small banks, but we do know the big bank model does work," he said.
He said the opposition to the big banks is misguided.
"What is important is the core concept that big banking is not good for the United States, and ... 'small banking is good for the United States.' That's the core issue here. The problem with that core issue is it tends to ignore reality. From 1987, when the number of banks in the United States was the highest since the Depression — we've lost one bank every business day. That's about 9,000 banks. The answer is because the business model doesn't work. Community banks tend to be one-trick ponies," he said.
"Outside the United States, there's no country which basically has made it illegal for a bank not to be involved in a capital markets capacity, and it would kind of make the United States unique in that regard, and it would drive up the cost of the banking in the United States," said Bove.