Tail Risk for Talons

A rather hawkish-sounded Janet Yellen this morning, in her testimony before Congress, is helping to keep a lid on the market's upside momentum. Technology stocks, namely the "FANG" leaders like FB AMZN GOOGL NFLX, are all red and giving slight gains of recent days back. TSLA is still green after a ferocious squeeze the last few weeks, but earnings are coming up next week and I would think some consolidation awaits. 

But, thus far, the softness in the tape has more of a consolidation feel to it than it does of an aggressively slide down. In other words, the talk of a rate hike in March at the next FOMC may be expected at this point.

A notable outperformer on the Yellen comments, though, is the banking sector. Typically, banks perform better with higher rates due to their business models. It may not always work out that way in due time. But the market likes to make that connection initially, of higher rates being favorable for the financials. 

As a result, the regional banks are back in focus on the long side. Regarding specific ideas, most regional banks are sporting similar charts--A strong post-election rally followed by a few months of sideways action. 

Now, however, a regional like the New England-based CFG is threatening a new leg higher on the Yellen remarks. If the regionals can hold this strength into the afternoon, it would suggest something beyond a knee-jerk reaction to the hawkish testimony.