Stocks rise, led by bank shares, on hopes for higher interest rates

Banks led the stock market higher Monday as investors anticipate that the Federal Reserve could raise interest rates this year from their historically low levels. That could help banks recover from a long slump by making lending more profitable.

The Dow Jones industrial average rose 107.59 points, or 0.6%, to 18,502.99. The Standard & Poor’s 500 index climbed 11.34 points, or 0.5%, to 2,180.38. The Nasdaq composite went up 13.41 points, or 0.3%, to 5,232.33.

Major U.S. banks posted solid gains as traders bet that the Fed was likely to nudge interest rates higher in December or even at its next policy meeting in September. Federal Reserve chief Janet L. Yellen said last week that the case for raising rates was strengthening, given the improvements in the economy.

Raising interest rates from their rock-bottom levels, where they have been since the 2008 financial crisis, could be a good thing not only for markets but also for savers, said Rob Lutts, chief investment officer of Cabot Wealth Management in Salem, Mass.

“We’re running out of excuses not to raise interest rates,” Lutts said. “We’re the wealthiest economy on the planet, and everybody who has a bank account is earning virtually zero on those balances today. There’s a lot of spending power that may be released in the economy” if savers earn more on their bank accounts, Lutts said.

Shares of Wells Fargo, the nation’s largest mortgage lender, climbed 2.2% to $49.56 and JPMorgan Chase rose 1.1% to $66.95. Banks are still one of the worst-performing sectors in the market this year. The financial sector of the S&P 500 has gained just 1.8% in 2016 versus a 6.7% increase for the broader index.

Herbalife climbed 4.6% to $63.30 after Carl Icahn, the company’s largest shareholder, said Friday that he bought more shares in the Los Angeles maker of nutritional supplements and that he never gave an order to sell his $1-billion stake. A Wall Street Journal report earlier Friday had said that the investment bank Jefferies had been looking for buyers for Icahn’s position.

Core-Mark Holding dived 14.1% to $38.72 after the South San Francisco distributor of consumer goods said its supply agreement with Circle K Stores for the southeastern U.S. will expire in January, reducing the number of Circle K stores it serves by 36%.

ResMed ticked down 1.6% to $67.90 after a study published Sunday found that for people who already have cardiovascular disease and sleep apnea, CPAP machines don’t seem to be effective at preventing heart attacks and strokes. The San Diego company’s products include CPAP machines.

Benchmark U.S. crude oil fell 66 cents to $46.98 a barrel. Brent crude, used to price oil internationally, lost 66 cents to $49.26 a barrel. In other energy trading, wholesale gasoline fell 5 cents to $1.47 a gallon, heating oil fell 1 cent to $1.49 a gallon and natural gas fell 2 cents to $2.85 per 1,000 cubic feet.

Trading was subdued ahead of the Labor Day holiday weekend. Very few companies are reporting earnings this week and there is scant news on the economy, apart from the Labor Department’s monthly job survey coming up Friday.

U.S. government bond prices rose. The yield on the 10-year Treasury note fell to 1.56% from 1.63%. The dollar rose to 101.98 yen from 101.86 yen. The euro rose to $1.1187 from $1.1183.

Precious and industrial metals futures closed mostly higher. Gold edged up $1.20 to $1,327.10 an ounce, silver rose 11 cents to $18.86 an ounce and copper edged down less than a penny to $2.08 a pound.

Overseas, France’s CAC 40 and Germany’s DAX each fell 0.4%. The London Stock Exchange was closed for a summer bank holiday. Earlier in Asia, Japan’s benchmark Nikkei 225 jumped 2.3% South Korea’s Kospi fell 0.3%. Hong Kong’s Hang Seng slid 0.4%.

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UPDATES:

2:05 p.m.: This article was updated with closing prices and additional details.

This article was originally published at 7:55 a.m.