NEW YORK (TheStreet) -- Watching the market's reaction to the Department of Labor's monthly jobs report can be more fun than the report itself. If, of course, you're into that sort of thing and you're not losing money because of the market's reaction.
Friday's jobs report was no different. The economy added 280,000 jobs in May, much higher than analysts' consensus of 226,000 and Goldman Sachs' estimate of 210,000. The result: Banking stocks jumped, with the KBW Bank Index gaining 1.7% and the S&P 500 Financials Index climbing 0.72%. The broader S&P 500 dipped 0.6%.
The reason for the gap between JPMorgan Chase (JPM), Bank of America (BAC), and Citigroup (C) and the rest of the market is simple: The monthly jobs report has been used as a barometer of when the Federal Reserve is likely to raise rates, a move about which the broader market has mixed feelings.
The mere act of a rate hike signals that the economy is performing well, which is good for consumption and business growth, but according to data compiled by S&P Capital IQ in February, the S&P 500 fell 11 out of 16 times in the three months after the first rate hike.
Banks are a different story: Low rates have compressed banks' net interest margin, a figure that gauges the profitability of lending cash deposited by their customers. They are unable to lend at a high rate, and with interest rates near zero since the financial crisis of 2008, it's not like they can pay any less on deposits.