Can Financials Continue To Climb?

It’s no secret that banks have led the market higher -- but can they continue to climb?

Over the past month the Financial Select SPDR has surged about 40% -- that was largely driven by investors gobbling up bank shares at extremely low multiples after extreme bearish sentiment sent those stocks into the cellar.

But now they seem more appropriately valued.

Can the financials continue to climb? Stuart Frankel trader Steve Grasso thinks they can.

"Money has come back into banks because investors were nervous about the stress tests and the capital raises,” he explains. “But the stress tests are in the rear view window and the capital raises are going well.”

In other words the factors that were keeping investors out of the banks have been extracted from the equation and as a result, this could be the beginning of a rotation into banks stocks.

In fact, the Fast Money traders believe we're already seeing that trend unfold.

On Friday, a strong day for stocks overall, some tech stocks including IBM closed lower while banks made enormous gains gains largely because investors rotated out of tech and into the financials.

“The new leader is the old leader,” Grasso says. “It’s all hinging on financials.

Dan Fitzpatrick of StockMarketMentor echoes those sentiments.

On Fast Money's Halftime Report he revealed a bullish perspective on the sector because of a dramatic change in the fear dynamic. "It used to be ‘afraid to be in’ – and now it’s ‘afraid to be out’", he says.

What's the bottom line? Despite the surge in bank stocks, two pro's think the sector still has room to run.




______________________________________________________
Got something to to say? Send us an e-mail at fastmoney-web@cnbc.com and your comment might be posted on the Rapid Recap. If you'd prefer to make a comment but not have it published on our website send your e-mail to fastmoney@cnbc.com.

Trader disclosure: On May 8th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (AAPL), (TGT), (WFC), (GS), (PCLN), (GE), (SDS), (AGU); Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Finerman's Firm Owns (MSFT) And Is Long (MSFT) Put Spreads; Finerman's Firm Owns (UNH); Finerman's Firm And Finerman Own (WFC) Preferred Shares, Finerman's Firm Is Short (WFC); Finerman's Firm Is Short (IJR), (SPY), (MDY), (IWM), (USO), (BBT); Terranova Owns (XBI), (GENZ), (ABT), (BP); Terranova Is Short (XOM) Call Spread; Terranova Owns (MS) And Is Short (MS) Calls; Terranova Owns (DIS) Call Spread; Terranova Is Short (JPM), (BRCM), (POT), (X), (WYNN), (JOYG), (HES); Terranova Is Short June Crude Oil Futures; Terranova Is Short June Natural Gas Futures

Terranova Works For (VRTS): Terranova Is Chief Alternatives Strategist Of Virtus Investment Partners, Ltd.: Terranova Is Co-Portfolio Manager Of The Virtus Diversifier PHOLIO

Virtus Diversifier PHOLIO Owns (IGE), (DBC), (DBV); Virtus Investment Partners Owns More Than 1% Of (ABD), (ARE), (CAL), (DLR), (EPR), (EXR), (IGE), (MEE), (DBC), (DBV), (DBA), (SKT), (UA), (CLB), (WBMD); Virtus Investment Partners Owns More Than 1% Of St Mary Land & Exploration Co; Virtus Investment Partners Owns More Than 1% Of Seagate Tax Refund Rights

GE Is The Parent Company Of CNBC; NBC Universal Is The Parent Company Of CNBC; Charles Schwab Is A Sponsor Of "Fast Money"

For Steve Grasso

Grasso Owns (V)
Grasso Owns (BAC)
Grasso Owns (XLF)
Grasso Owns (RIMM)
Stuart Frankel Clients Own (BAC)
Stuart Frankel Clients Own (JPM)
Stuart Frankel Clients Own (GS)
Stuart Frankel Clients Own (HPQ)
Stuart Frankel Clients Own (RIMM)
Stuart Frankel Clients Own (V)
Stuart Frankel Clients Own (XLF)
Stuart Frankel And Stuart Frankel Clients Own (WMT)