Predicting the S&P: What Banks to Follow

With so many investigations into big banks underway, the financial sector has been taking a hit. And as the biggest banks have seen their stocks plummet, so has the S&P 500 Index (NYSE:SPY). Financial stocks (NYSE:XLF) make up 14% of the index, so when the banks are having a bad day, everyone’s having a bad day.

This morning, for example, big bank shares have rallied, and as usual, it’s not just one, but all of the major banks that are in the green. JPMorgan Chase & Co. (NYSE:JPM) is up 1.22%, Bank of America (NYSE:BAC) is up 0.88%, Citigroup Inc. (NYSE:C) is up 3.43%, Goldman Sachs Group Inc. (NYSE:GS) is up 1.07%, and Wells Fargo (NYSE:WFC) is up 2.23%. All of the major banks have been on the upswing since late in the day Friday, though each of the banks listed above, without exception, is still significantly in the red over the last 3-month period. Bank of America has fared the worst with a 23.92% drop since March 14.

The S&P 500 Index has, in turn, risen 0.38% today, recovering slightly from a nearly 30-point tumble since last Thursday. And, like the big banks that make up such a large part of the index, it’s also down over the last 3 months, 2.26% in the red.

It’s not always clear what factors are pushing bank shares up or down, but you can always be sure that those same factors will manifest themselves on the S&P. While JPMorgan is the best stock to watch, keeping an eye on the financial sector in general will give you a good look into the near future of the index.

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