There's nothing like a good old-fashioned bank run to get investors to think about safety again. And investors are tipping their hands on their favorite financial stocks in the S&P 500 and beyond.
Eight financial stocks in the S&P 1500 (which includes the S&P 500) — including insurer HCI Group and banks like JPMorganChase — are up 0.5% or more in the past two trading days, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. That might not sound like much of a gain. But it's a monster rally compared with some of the drops we've seen in other financials.
During the past two trading days, where concerns about Silicon Valley Bank and other financials heated up, shares of First Republic Bank and PacWest Bancorp are down 68% and 38%, respectively. Even the diversified Financial Select SPDR SPDR ETF is down 4.7% during all the drama.
So it's important to note where financial investors are shifting.
Financial Sector Pivotal To The S&P 500
It's important to investors to understand just how key the financial sector is to the S&P 500. Financials account for 11.3% of the S&P 500, ranking it No. 3 out of the 11 sectors.
The only sectors more important than financials in the S&P 500 are information technology at 27.9% and health care at 14.4%. Additionally, financials have a direct relationship with the markets. The sector is home to key online brokers like Charles Schwab and banks like JPMorgan Chase, which extend credit and ensure the functioning of the markets.
Silicon Valley Bank's failure was due to a run on the bank. Because of that, its failure presents a buying opportunity instead of a reason to panic, says Ladenburg Thalmann Asset Management CEO Philip Blancato.
"In my opinion, this is a buying opportunity if we get any real stress in the equity markets, as a flight to safety in the bond market has driven yields lower. (This is) putting less pressure on stocks in the long run from an interest-rate point of view."
Which Financials Are S&P 500 Investors Buying?
It's important to follow the money during times of stress. And it's easy to see how widespread the pain is.
More than 95% of the 232 stocks in the S&P 1500 financial sector dropped in the past two trading days. And not by a little, either: The average drop is 8.4%.
Of course, that also means that 5% of financial stocks are rising in the wake of the bank-failure news. So, which stocks are gaining?
The staid insurance industry is picking up some of the fleeing capital. HCI Group, a property and casualty insurer operating out of Tampa, Fla., is the top financial stock in the past two trading days. It's up more than 5% as the rest of the sector crashes around it. Shares are rising as the company benefits from more business-friendly regulations in Florida following Hurricane Ian.
But what about the banks? The biggest winner in the past two days is JPMorgan Chase. Shares are up more than 2.5% on the hope that nervous money at regional banks might make its way to larger money-center banks. Even scandal-plagued bank Wells Fargo saw shares inch up 0.6% amid the financial turbulence.
The Federal government renewed its commitment to protect depositors during the drama. But when bank runs start, they can take on a life of their own. S&P 500 investors want to be on the right side of the trade.
Biggest Financial Winners
Top jumps of S&P 1500 stocks in the past two trading days.
| Company | Ticker | Index | 2-day change | Financial industry |
|---|---|---|---|---|
| HCI Group | S&P 600 | 5.4% | Insurance | |
| MarketAxess | S&P 500 | 3.2% | Diversified Financials | |
| JPMorgan Chase | S&P 500 | 2.5% | Banks | |
| Park National | S&P 600 | 2.1% | Banks | |
| Washington Federal | S&P 400 | 1.6% | Banks | |
| CME Group | S&P 500 | 1.3% | Diversified Financials | |
| Northwest Bancshares | S&P 600 | 0.9% | Banks | |
| Wells Fargo | S&P 500 | 0.6% | Banks |
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
