JPMorgan, Goldman Hit All-Time Highs as Dovish Fed Juices Bank Profits

JPMorgan, Goldman Hit All-Time Highs as Dovish Fed Juices Bank Profits

U.S. bank stocks extended gains Thursday, with JPMorgan  (JPM) - Get Report, Morgan Stanley  (MS) - Get Report and Goldman Sachs  (GS) - Get Report rising to fresh all-time highs, as investors re-set earnings expectations for the country's biggest lenders following the Fed's bullish update on growth. 

The Fed's decision to hold its benchmark lending rate unchanged, effectively anchoring short-term bonds yields at near record lows, while indicting a tolerance for inflation that has lifted longer-term yields to multi-year highs, gives banks some of the best financial conditions under which they operate in at least five years.

The Fed's tolerance for faster inflation -- which could accelerate to 2.2% this year as the base-effects from higher oil and commodity prices factor into CPI readings throughout the spring and summer months -- lifted benchmark 10-year Treasury yields a January 2020 high of 1.75% in early Thursday trading.

The move puts the yield gap between 2-year and 10-year notes at around 1.6%, the steepest since 2015, and a normally unambiguous indication of near-term economic bullishness. 

With consumer balance sheets improving on the back of stimulus checks from President Joe Biden's American Rescue Plan, which includes enhanced unemployment benefits that last until September, default rates are likely to fall