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Tuesday's Bank Stocks: Wider markets hit highs as banks advance

Bank stocks edged higher during trading Tuesday, Dec. 13, as broader equity markets continued their strong late-year run-up.

The SNL U.S. Bank Index was up 0.18% to 532.52, and the SNL U.S. Thrift Index was up 0.19% to 970.35.

The Dow Jones Industrial Average traded higher during the day and moved closer to 20,000 — a major milestone for the index — during the session. Wider markets have surged after the election result as investors continue to weigh the possible policies from President-elect Donald Trump's administration which could spur higher growth or profits. The focus on simplifying and reducing corporate tax rates has been an important driver of the run-up in equities, argued FTN Financial economist Jay Morelock.

"The equity rally is the most sound and the asset class move that can last the longest," Morelock said, arguing that the potential for major tax reform would directly benefit the bottom line of major U.S. corporations.

"It's a positive development for those companies, and the possible repatriation of overseas money ... could have a big effect. I'm not sure that will affect the real economy much ... but this will be good for, and returned to, shareholders," Morelock added.

Investors were also waiting for word from the Federal Reserve, as top officials at the bank met to open the final Federal Open Market Committee meeting of 2016 amid wide expectations that the committee will lift its key interest rate target range.

And though rising interest rates have typically undercut equity markets, Morelock said markets will likely continue to rise as long as Fed officials emphasize that they plan to continue slowly normalizing their interest rate policy. "The Fed wants to limit asset prices, but they're not trying to pop a bubble here and they don't think things are overheating," he added.

The Dow Jones Industrial Average rose 0.58% to 19,911.21, the S&P 500 advanced 0.65% to 2,271.72 and the Nasdaq composite index gained 0.95% to 5,463.83.

Shares of Wells Fargo & Co. were up 0.11% on the day to $55.84, though after markets closed federal banking regulators announced that the company had failed to fix deficiencies cited in its living will plan. As a result, senior agency officials are instituting restrictions on the companies' international and nonbank businesses.

Other major names in the bank industry advanced during the day. JPMorgan Chase & Co. rose 0.04% to $84.76, Citigroup Inc. was up 0.40% to $59.79 and U.S. Bancorp shares were up 0.23% to $51.70 at the close.

Bank of America Corp. shares were unchanged at $22.61, while State Street Corp. slipped 0.21% to $80.06.

Pacific Premier Bancorp Inc. announced it will acquire Heritage Oaks Bancorp under an all-stock deal valued at $11.68 per share, or approximately $405.6 million, based on the buyer's Dec. 12 closing price of $33.65. Pacific Premier shares were off 0.15% to $33.60 on the day, while Heritage shares jumped 6.26% to $11.54.

In economic news, U.S. foreclosure inventory dropped 31.5% in October, and completed foreclosures declined 24.9% compared to the year-ago period, according to CoreLogic.

Among thrifts, New York Community Bancorp Inc. rose 0.89% to $16.97.

The FDIC's Board of Directors approved a $2.16 billion operating budget for 2017. That total is 2.4% lower from 2016 and 46% lower than the peak in 2010 at the height of the financial crisis.

Market prices and index values are current as of the time of publication and are subject to change.