RISING BOND YIELDS BOOST FINANCIALS -- BANK SPDRS TOUCH NEW RECORDS
FINANCIAL SPDR HITS NEW RECORD...Energy and financials are the day's two strongest sectors. Freezing temperatures across the U.S. are pushing energy prices higher today and energy stocks along with them. Financials are also having a strong day courtesy of another jump in Treasury bond yields. Chart 1 shows the Financial Sector SPDR (XLF) hitting a new record today. As has been the case recently, the XLF is being led higher by bank stocks which are big beneficiaries of rising bond yields and a steepening yield curve. Bank ETFs are also touching new records.

BANK ETFS ALSO TOUCH NEW RECORDS... Friday's message showed the S&P Bank SPDR (KBE) nearing a test of its old high formed three years ago. The weekly bars in Chart 2 below show the KBE touching a new record today. Chart 3 shows the S&P Regional Banking ETF (KRE) doing the same. Bank stocks are leading the XLF higher today. Rising bond yields boost banks' net interest margin which increases along with a steepening yield curve. That's because banks pay their depositors less with a short-term yield while charging more for loans (long-term yield).

