The short and simple answer: Fear of Negative Interest rates.
I wrote a small post on Negative Interest rates. Read it - in case you missed it.
Because of QE, the banking system is awash with reserves. After 2008 crisis, US Fed bought all the bonds and mortgage backed securities and credited the bank with reserves. This reserves is in excess of statutory requirement. That's why it's called excess reserves. That's not all - the best part is that most of the excess reserve parked with Fed earns risk free interest rates of 0.25%. Now the FEAR is What if this interest becomes negative, then banks will start losing money and that's why Bank shares have come off so sharply in last 1.5 months.
How much money are banks keeping in "excess reserves?"
Oh, about $2.3 trillion
Here's Bank of America stock chart
Here's Citigroup Chart
Today Bank stocks are up because
One of the smartest guys on Wall Street - James Dimon, CEO of J.P. Morgan Chase bought 500,000 of his bank’s shares yesterday
— Deepak Singh (@smarket) February 12, 2016
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers