By Sweta Singh
(Reuters) - Shares of large U.S. banks touched new highs on Wednesday, buoyed by comments from several Fed policymakers that stoked expectations for a March interest rate hike.
President Donald Trump's measured and inclusive tone in his first speech to a joint session of Congress since taking office added to the optimism in the market.
JPMorgan Chase & Co <JPM.N> Goldman Sachs Group Inc <GS.N> and Wells Fargo & Co <WFC.N> touched record highs, while Bank of America Corp <BAC.N> and Morgan Stanley <MS.N> rose to their highest levels in more than eight years.
Gains in financial stocks pushed the S&P financial index <.SPSY> to its highest level since December 2007.
Bank stocks have been on a tear since the Nov. 8 U.S. presidential elections on hopes that the lenders will benefit from lighter regulation, rising interest rates and lower taxes under Trump administration.
New York Fed President William Dudley, among the most influential U.S. central bankers, said on Tuesday that the case for tightening monetary policy "has become a lot more compelling" since the election of Trump as president and a Republican-controlled Congress.
Traders have now priced in a nearly 70 percent chance of a rate hike when the Fed's policy-setting body meets on March 14-15, according to Thomson Reuters data.
"Chances are that rate hikes are coming through faster and the President's speech yesterday showed that tax reform, which will hugely benefit the banks, is a key policy item for the administration," Keefe, Bruyette & Woods analyst Brian Kleinhanzl said.
"Faster interest rate hikes would come as a relief to banks that have been reeling under pressure to grow their revenue over the last several years."
Overall, revenue at the top six U.S. banks fell 0.9 percent in 2016, compared with a 0.5 percent fall in 2015.
The Fed hinted at three rate hikes in 2016 but held back till December, when it raised the interest rate by 25 basis points. At that time, it also signaled a faster pace of rate hikes in 2017.
JPMorgan also struck a positive note at its investor day on Tuesday.
Chief Executive Jamie Dimon, a lifelong Democrat, said he remained confident about the U.S. economy, adding that the outlook will be even better if the federal government overhauls corporate taxes, thins out redundant regulation and boosts spending on public infrastructure.
"The future is bright," he said.
(Reporting by Sweta Singh and Sruthi Shankar in Bengaluru; Editing by Anil D'Silva)