Bank Shares Sell Off Even as the Fed Delivers Its First Hike Since 2023

Large bank stocks fell in the sessions following the Federal Reserve's decision to raise its policy rate for the first time in three years, an outcome that runs counter to the conventional view that higher rates widen lending margins. JPMorgan Chase slipped about 1%, Wells Fargo dropped 3% and Goldman Sachs lost 4%.

The explanation analysts have offered is positioning rather than fundamentals. Bank shares rallied through the summer in anticipation of tighter policy, with JPMorgan up roughly 14% over the past year, leaving limited incremental demand once the decision was confirmed. Net interest margin benefits also arrive with a lag, while deposit costs tend to reprice faster.

Bank of America economists now expect three quarter-point increases in 2026, in September, October and December, which would lift the federal funds target range to 4.25%-4.50%. That forecast marks a sharp reversal from the firm's earlier call for no hikes this year and sits at the hawkish end of street expectations.