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Market Mystery: Why Are Banks on the Rise?

With Fed Chairman Bernanke signaling that a rate hike is on the horizon, one would expect the financial sector to lose some ground. On the contrary, financials outperformed the market all day, but how did this happen?

Steve Grasso agrees that both higher rates and taxes are both bad for banks, the banks are living in a minefield of uncertainty, he says. Easing of default fears on sovereign debt also helped bank stocks that are exposed beyond American borders, says Tim Seymour, but there are real fears for European banks if GDP is set to drop, he warns.

The best thing the banks have going for them is a steep yield curve, says Dennis Gartman, who thinks the biggest danger to banks is the uncertainty of regulation coming from Washington. For this reason, Gartman thinks the financial sector is a place investors may want to shy away from. For the most part, the traders agree that when the President comes on television, or is set to make an announcement, Wall Street buckles and investors look to sell, aside from ideology.

The real story in the banking sector, the traders agree, lies in the bank tax announced by the government in January, which has seen strong banks like JPMorgan drop lower without any sign of recovery. You have to trade around this uncertainty, says Joe Terranova, who recommends developing a point of reference when you're looking at these stocks.


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Trader disclosure: On February 10th, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Najarian Owns (AAPL) Call Spread; Najarian Owns (BP), Is Short (BP) Calls; Najarian Owns (DIS), Is Short (DIS) Calls; Najarian Owns (JNJ); Najarian Owns (MS), Is Short (MS) Calls
Najarian Owns (PFE); Najarian Owns (XLF) Calls; Najarian Owns (HIG) Calls

Seymour Owns (AAPL)
Seymour Owns (BAC)
Seymour Owns (F)
Seymour Owns (FCX)
Seygem Asset Management Is Short (VALE)
Seymour Owns (X)
Seymour Owns (EMB)
Seymour Owns (MSFT)
Seymour Owns (VIP)

Terranova Owns (BAC); Terranova Owns (JPM); Terranova Owns (OIH); Terranova Owns (DELL); Terranova Owns (MSFT); Terranova Owns (EMC); Terranova Owns (AAPL); Terranova Owns (GOOG)

Terranova Works For (VRTS)

Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.

Virtus Investment Partners Owns More Than 1% Of (CLB)
Virtus Investment Partners Owns More Than 1% Of (DLR)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (SKT)

Grasso Owns (ABK); Grasso Owns (AAPL); Grasso Owns (ASTM); Grasso Owns (BAC); Grasso Owns (BGP); Grasso Owns (C); Grasso Owns (COST); Grasso Owns (CSCO); Grasso Owns (FAZ); Grasso Owns (PFE); Grasso Owns (PRST); Grasso Owns (WMT); Grasso Owns (V)

Stuart Frankel & Co. Inc. And Its Partners Own (ABX)
Stuart Frankel & Co. Inc. And Its Partners Own (CUBA)
Stuart Frankel & Co. Inc. And Its Partners Own (GERN)
Stuart Frankel & Co. Inc. And Its Partners Own (GLG)
Stuart Frankel & Co. Inc. And Its Partners Own (HSPO)
Stuart Frankel & Co. Inc. And Its Partners Own (NWS.A)
Stuart Frankel & Co. Inc. And Its Partners Own (NXST)
Stuart Frankel & Co. Inc. And Its Partners Own (NYX)
Stuart Frankel & Co. Inc. And Its Partners Own (PDE)
Stuart Frankel & Co. Inc. And Its Partners Own (PRST)
Stuart Frankel & Co. Inc. And Its Partners Own (RDC)
Stuart Frankel & Co. Inc. And Its Partners Own (ROK)
Stuart Frankel & Co. Inc. And Its Partners Own (TLM)
Stuart Frankel & Co. Inc. And Its Partners Own (TOL)
Stuart Frankel & Co. Inc. And Its Partners Own (XRX)

Stuart Frankel & Co. Inc. And Its Partners Are Short (QQQQ)
Stuart Frankel & Co. Inc. And Its Partners Are Short (CL)

DENNIS GARTMAN

Funds Managed By Gartman Are Long Canadian Dollars, Australian Dollars
Funds Managed By Gartman Are Short British Pound Sterling, Euro
Funds Managed By Gartman Own (KBE)
Funds Managed By Gartman Are Short (XLF)
Funds Managed By Gartman Own (WMT)
Funds Managed By Gartman Own (FDO)
Funds Managed By Gartman Are Short (RL)
Funds Managed By Gartman Are Short (SPG)

TODD GORDON

Gordon Is Short Australian Dollar

TOM LYDON

Lydon Is A Board Member Of Rydex/SGI