State Street SPDR S&P Regional Banking ETF

KRE

Market cap $4.97B

Wall Street's biggest banks are proving that even geopolitical uncertainty and volatile markets can be highly profitable when trading desks stay busy and artificial intelligence fuels an unprecedented wave of capital raising. The six largest US banks generated a combined $55 billion in second-quarter profits, comfortably exceeding analysts' expectations as market volatility, record AI-related fundraising and a resurgence in investment banking produced one of the strongest quarters for the financial industry in years.

U.S. regional banks including U.S. Bancorp and PNC Financial relied on a lending rebound and strong fee income to deliver broad second-quarter gains, alleviating concerns that the Middle East war would weigh on loan demand and spending.

KBW CEO Tom Michaud joins CNBC's Squawk on the Street to discuss his expectations for bank earnings as major banks begin reporting second-quarter results on Tuesday, the outlook for regional banks, and more.

The SPDR S&P Regional Banking ETF (KRE) is downgraded to Hold as the main Fed easing catalyst has played out and the entry point is less attractive. KRE's outperformance since October 2025 was driven by monetary policy tailwinds, but future gains are constrained by a fading Fed tailwind and slower net interest margin expansion. Current Fed projections and futures pricing suggest a less accommodative policy path, increasing resistance for KRE near record highs.

Where do things stand with banks, brokers, insurers, and specialty lenders heading into next week's Q2 reports? The MoneyShow Chart of the Day shows how four different sector ETFs have performed year-to-date: the State Street Financial Select Sector SPDR Fund, State Street SPDR S&P Regional Banking ETF, VanEck BDC Income ETF, and iShares US Broker-Dealers ETF. There's a wide dispersion of returns. Regional banks are leading with a gain of 12.4%, while Business Development Companies that lend to riskier or smaller companies are lagging with a loss of around 15%.

The FOMC indicated at its last meeting that a rate hike in 2026 is on the table. Typically, the market reacts negatively to rate hikes, but this ETF would stand to gain from them.

The iShares (IYF) provides broader exposure across the financial sector while the State Street SPDR (KRE) focuses exclusively on smaller regional institutions. KRE features a slightly lower expense ratio and a meaningfully higher trailing-12-month dividend yield.

Fresh tensions over the Strait of Hormuz, a vital maritime route for 20% of the world's oil, could keep gasoline from falling below the $3 mark.

While the Federal Reserve left interest rates unchanged at the latest meeting, investors increasingly speculate that rate hikes are on the table in 2026.

Banks announced increased dividends and some announced ​new share buy-back programs on ‌Wednesday, after the Federal Reserve released results of its stress test.