Bank Stocks Rally, Traders Sigh With Relief

NEW YORK ( TheStreet) -- Banks stocks were jumping Friday, drawing an almost palpable sense of relief from professional traders who have been bemoaning a lack of leadership from this sector.

Financial stocks are viewed as an economic health barometer, with traders traditionally looking to these stocks to lead a sustainable market rally. The trigger for this week's gains: bank stress tests that were released after Thursday's close and which -- unsurprisingly -- most of the mega-cap banks passed easily, implying dividend growth would soon resume.

Berstein Research senior analyst Brad Hintz said the stress tests implied Goldman Sachs (GS), Morgan Stanley (MS) and State Street  (SST) were among the most economically sensitive stocks, with these firms subjected to additional global market shock and counterparty default scenarios.

Compared to the 2013 stress test, the impact was modestly worse for Goldman Sachs, slightly better for Morgan Stanley and better for State Street and BNY Mellon (BK), Hintz added. The broker suggests Goldman Sachs, Morgan Stanley, Northern Trust (NTRS), the Bank of New York Mellon and State Street will be able to easily return capital, and rates GS and MS as "outperform."

Other "risk-on" indicators are also clear in markets. Check out the gold price below, which jumped earlier this month as fears around geopolitical risk in Europe and the outlook for Chinese growth shook sentiment, causing a retreat to safe-havens. Gold prices have since nosedived as the threat of military action in Ukraine fades and economic data points to the ongoing U.S. recovery.

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