Rate Hike Falls Flat for Bank Stocks

The Federal Reserve's recent rate hike was expected to boost bank stocks, but JPMorgan Chase (NYSE:JPM) and Wells Fargo (NYSE:WFC) instead saw significant drops. Goldman Sachs (NYSE:GS) fell 4% on the news.

The Fed raised its target range to 4% for the first time in three years, with the hike taking effect on September 17, 2026. This was seen as a positive development for banks, as loans would reprice faster than deposits and net interest margins would widen. However, this did not translate into gains for bank stocks.

One reason for this disconnect is that the rate hike was widely anticipated, with the SPDR S&P Regional Banking ETF already up 12.6% over the past year and 13.55% year to date. JPMorgan Chase itself has seen a 13.75% one-year gain and a 151.42% five-year run.

The curve is also playing a role, with the 10-year minus 2-year spread closing at 0.25% on September 18, down from 0.74% in February. This flatter curve compresses the very spread that the hike was supposed to widen.