Strong Day for Stocks, Financial Sector Leads Gains

The stock market experienced a robust performance on Tuesday. The Dow Jones Industrial Average (DJINDICES: ^DJI), S&P 500 (SNPINDEX: ^GSPC), and Nasdaq Composite (NASDAQINDEX: ^IXIC) all rose by about 2% by 12:15 p.m. ET.

Of particular note, the financial sector emerged as one of the market’s strongest performers. Megabank JPMorgan Chase (NYSE: JPM) increased by 4.2%. Meanwhile, both Citigroup (NYSE: C) and Wells Fargo (NYSE: WFC) gained approximately 3% during the day.

What’s Driving Bank Stocks Higher?

Investor optimism regarding potential tariff agreements is a key factor contributing to the overall rise in the stock market. President Trump indicated on social media that he had a “great call” with South Korea, and noted that China is keen to reach a deal. This positive sentiment follows Treasury Secretary Scott Bessent’s announcement that 70 countries are ready to initiate tariff negotiations.

However, it is worth mentioning that bank stocks were severely impacted in last week’s market downturn following Trump’s initial tariff announcement. Even with today’s recovery, all three major bank stocks are down between 8.5% and 14% over the past week.

JPM data by YCharts

While tariffs do not directly affect banks, their performance is closely linked to the US economy’s health. If tariffs increase inflation and potentially lead to a recession, this could diminish loan demand and raise consumer default rates—two factors detrimental to bank profitability.

At the time of this report, no significant tariff deals had been finalized, and additional tariffs announced by Trump are still scheduled to take effect at midnight on April 9.

Upcoming Bank Earnings Reports

JPMorgan Chase and Wells Fargo are set to report their first-quarter earnings on Friday, April 11. Citigroup and other major financial institutions will follow with their results early next week.

Investors should focus on specific metrics such as delinquency rates and charge-offs for insights into consumer health. While the tariff announcement and subsequent market sell-off occurred after the first quarter closed, persistent concerns about rising defaults remain.

Additionally, monitoring how bank net interest margins are performing will be critical. The most recent Federal Reserve interest rate cut occurred in December 2024, making this quarter the first to reflect the lower federal funds rate in financial outcomes.

In summary, the volatility of these three bank stocks is noteworthy, and upcoming earnings reports will provide a clearer picture of their operational performance.

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Wells Fargo and Citigroup are advertising partners of Motley Fool Money. JPMorgan Chase is also an advertising partner of Motley Fool Money. Matt Frankel does not hold any positions in the stocks mentioned. The Motley Fool recommends JPMorgan Chase and has financial interests in it.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.