As Fed Rate Cut Bets Rise, Tuesday's Bank Of America, Wells Fargo Rallies Signal Renewed Economic Confidence

Shares of Bank of America Corp BAC and Wells Fargo & Co WFC are up Tuesday afternoon, lifted by a broad market rally that pushed the S&P 500 and Nasdaq-100 to new all-time highs.What To Know: Tuesday’s investor optimism stems from a July inflation report that presented a split verdict for the U.S. economy, ultimately bolstering the case for an upcoming Federal Reserve interest rate cut.The key driver for the banking sector was the nuanced inflation data. While the headline Consumer Price Index (CPI) held at a relatively tame 2.7% year-over-year, the core CPI, which excludes volatile food and energy prices, accelerated to 3.1%, topping economists’ forecasts. For megabanks such as Bank of America and Wells Fargo, this hotter core reading is constructive news. It signals underlying economic resilience and robust consumer demand, which diminishes the risk of widespread loan defaults and supports healthy lending activity.A strong economy is fundamental to the profitability of both Bank of America’s diverse global banking operations and Wells Fargo’s focus on U.S. consumer and commercial banking.Simultaneously, the report solidified investor conviction that the Federal Reserve will proceed with a rate cut at its September meeting, with futures markets pricing in a 94% probability of a quarter-point reduction. This anticipated move is viewed not as a response to a failing economy, but as a proactive measure to sustain the current expansion. An accommodative Fed policy creates a favorable environment for banks by encouraging borrowing and investment, supporting asset prices, and potentially steepening the yield curve, which could improve net interest margins. This combination of a durable economy and expected monetary easing provides a positive outlook for bank profitability, fueling Tuesday’s rise in both Bank of America and Wells Farogo shares.BAC, WFC Price Action: According to data from Benzinga Pro, Bank of America shares closed Tuesday higher by 2.86% to $47.50 and Wells Fargo shares were higher by 2.42% to $79.48.Read Also: CoreWeave’s Chart Looks Bullish — Earnings Could Be The Next CatalystHow To Buy BAC StockBesides going to a brokerage platform to purchase a share — or fractional share — of stock, you can also gain access to shares either by buying an exchange traded fund (ETF) that holds the stock itself, or by allocating yourself to a strategy in your 401(k) that would seek to acquire shares in a mutual fund or other instrument.For example, for Bank of America, it is the Financials sector. An ETF will likely hold shares in many liquid and large companies that help track that sector, allowing an investor to gain exposure to the trends within that segment.Image: Shutterstock