Bank stocks could surge 'no matter what' Trump does

Bank stocks are surging to their highest level since the financial crisis, and some strategists say the group could have more room to run.

Two popular exchange-traded funds tracking bank stocks, the SPDR S&P Bank ETF and the SPDR S&P Regional Banking ETF, jumped more than 3 percent Wednesday following President Donald Trump's speech to a joint session of Congress. Investors have priced in the prospect of deregulation in the financial industry under the Trump administration, along with the increasing likelihood of a Federal Reserve interest rate hike.

A strong macroeconomic picture is supportive for the banks "no matter what policies, almost, come out of Washington," said Gina Sanchez, CEO of Chantico Global.

"And the reason for that is that the curve should naturally steepen as the Fed rate hike probability goes up," Sanchez said. She said the yield on the U.S. 10-year Treasury note should rise to 3.3 percent by 2018.

The S&P 500 financial sector closed Wednesday's trading as the best-performing sector. JPMorgan and Goldman Sachs hit all-time highs Wednesday, Citigroup traded at levels not seen since January 2009 and Bank of America reached its highest price since October 2008.

"This is a regime change. This has really been a group that's been out of favor for almost 20 years," Chris Verrone, head of technical analysis at Strategas Research Partners, said Wednesday on CNBC's "Power Lunch."

Indeed, "when the new high data expands, that is bullish longer-term," Verrone said.

Federal Reserve Bank of New York President William Dudley said Tuesday that the case for raising interest rates has become stronger, sending bond yields rising in Wednesday trading. Higher interest rates and a steeper yield curve tend to help the bank stocks, as the cost of borrowing is higher and the institutions tend to borrow money in the short-term and lend out in the long term.

The bank stocks have appeared to hold up even in recent instances of a more flattened yield curve, Verrone said.

"So they seem a little bit more immune to curve dynamics, which I think is important. This is a group we want to stay long," he said.


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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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