Financials have the market’s deepest bench of near-breakouts
Artificial intelligence stocks have been dominating market attention this year, but a growing number of financial stocks are approaching breakout territory in recent periods. CNBC screened the S & P 500 for stocks trading close to 52-week highs that have not made new highs recently. Financials stood out with roughly a quarter of the sector — 20 of 76 — within 10% of their highs while not hitting fresh highs in at least 100 days as of the close Tuesday. This group includes large banks like JPMorgan Chase , Fifth Third , US Bancorp , Citizens Financials and Bank of America . A number off insurers too appear on the list, including Chubb , Travelers , Hartford Insurance and Cincinnati Financial . The setup is notable partly because financials have largely been overshadowed by AI-linked technology stocks this year, even as many financials have quietly posted strong returns. In fact, the Invesco KBW Bank ETF (KBWB) is up more than 8% in June, outperforming the hot semiconductor group. In a sign the group could be forming a breakout, the KBWB hit an all-time high Wednesday, back to its inception in 2011. JPMorgan and Bank of America too climbed to their first intraday record highs since early January. The moves come as investors continue to reassess the outlook for economic growth and interest rates, ahead of Kevin Warsh’s first meeting as chair of the Federal Reserve. The recent strength in financials also reflects improving capital markets activity. Speaking on CNBC on Tuesday, Ritholtz Wealth Management CEO Josh Brown noted that several of the large firms are benefiting from a resurgence in public offerings and dealmaking. “They’re not just spread financials, they’re fee financials,” he said. “They are feasting on this renewed appetite int he public markets for deals.” JPMorgan and BofA just this morning hit new highs, despite going more than five months without a new high. Block , Citizens Financial, Travelers and Chubb are also within striking distance of yearly highs, suggesting strength extends beyond the banking industry. The backdrop for banks remains somewhat unusual. While investors have typically viewed a flattening yield curve as a negative signal for the industry, analysts at Bank of America note that bank fundamentals have historically remained resilient during periods of “bear flattening,” when short-term rates rise faster than long-term ones. Across seven bear-flattening cycles since the 1970s, industry net income has grown 7% on average and loan growth accelerated, the analysts said in a note Wednesday, even as bank stocks underperformed the broader market. There may be investor unease associated with the rate cycle holding so many financial stocks just below their highs despite generally favorable operating conditions. Another themes in the screen is a number of insurers. Property and casualty insurers had been among the market’s best-performers over the past few years, benefiting from higher premiums and improved investment income. For investors looking beyond AI, financials may be one of the market’s largest reservoirs of potential breakouts. — CNBC’s Gina Francolla contributed reporting
