The U.S. bank stock index is expected to set a record close

The U.S. bank stock index could close on record for the first time since January 2022 as investors speculate that the Federal Reserve could cut interest rates next month. The KBW Bank Index, which tracks 24 of the largest U.S. banks, rose as much as 3 percent to set a record close. That would end a slump of more than 900 trading days, the longest since the financial crisis, when the index failed to set a new high for more than 3,500 days. Bank stocks also joined Friday's broader market rally as Powell gingerly opened the door to a September rate cut. Overall, major Wall Street banks had solid second-quarter results, helped by volatility in the stock, bond and foreign exchange markets. All of the banks that had been subjected to the Fed's annual stress testing passed comfortably, allowing them to raise dividends beyond market expectations. This year's rally in bank stocks has also been driven by expectations that more dovish regulatory environments under the Trump administration will spur Mergers and Acquisitions activity, boosting investment banking revenues.