MW Bank stocks see broad rally as U.S.-China trade talks reduce recession predictions

By Steve Gelsi

Berkshire Hathaway rises 1.8%, while JPMorgan Chase gains nearly 4%

Bank stocks are trading above their April 2 closing prices in early trading on Monday, as, following "liberation day," the sector sees optimism around the China-U.S. tariff discussions.

With the prospect of more favorable tariff terms between the two key trading partners, investors are betting that increased economic activity will boost financial activity, boosting banking revenues.

Some of this positive sentiment about the economy was already showing, as J.P. Morgan strategists said "the market is already pricing a lower probability (35%) of recession" and further "substantial" progress on trade talks.

Read: How Bessent explained the 115-point reduction in U.S.-China tariffs that has triggered market euphoria.

Last month, J.P. Morgan economists raised their recession probability to 60%, citing President Donald Trump's aggressive tariff stance.

"Further de-escalation of tariffs, positive momentum around trade negotiations, strong 1Q earnings and resilient macro data have contributed to a broad risk-on across assets," the economists said.

The momentum is increasing after the U.S. and China agreed to reduce tariffs for 90 days while trade talks continue.

The Financial Select Sector SPDR ETF XLF rose 2.9% to $51.32 in premarket trading. The ETF of the largest U.S. financial companies closed at $50.16 on April 2.

Among XLF components, Berkshire Hathaway Inc.'s stock $(BRK.B)$ $(BRK.A)$ was up 1.5%; JPMorgan Chase & Co. shares $(JPM)$ jumped 3.8%; shares of Visa Inc. (V) and Mastercard Inc. $(MA)$ rose 1.8%; and Charles Schwab Corp.'s stock $(SCHW)$ rose 3.4%.

The SPDR S&P Bank ETF KBE rallied 5.4% in premarket trading to $55.51 a share, ahead of its April 2 close of $53.42 a share. Components Mr. Cooper Group Inc. shares (COOP) rose 1.8%, while MGIC Investment Corp.'s stock (MTG) advanced by 1.9% and First BanCorp shares $(FBP)$ rose 4%.

The banking sector drew strength from the broad market, as the Dow Jones Industrial Average DJIA headed toward a 1,000-point rally at the opening bell.

-Steve Gelsi

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May 12, 2025 08:01 ET (12:01 GMT)

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