Shares of banks and other financial institutions have experienced a significant boost as they prepare for the upcoming earnings season. J.D. Joyce, president of Houston financial advisory Joyce Wealth Management, highlighted that the yield curve dynamics will play a crucial role in determining the outcomes for these institutions. The inverted yield curve, where short-term borrowing costs surpass long-term interest rates, has created challenges for banks in generating profits.

Furthermore, small- and mid-cap banks face high expectations in terms of earnings due to the recent market rally. Analysts at brokerage Morgan Stanley have noted that credit quality for smaller banks’ clients could be affected by the anticipated economic slowdown.

The failure of the “Santa Claus” rally at the beginning of the year dealt a blow to investor sentiment. However, the recent rally in the S&P 500 on Monday has provided a much-needed boost and has the potential to restore confidence among stock investors.

In other news, Bank of America is expected to incur a $1.6 billion charge in the fourth quarter due to the transition away from the London Interbank Offered Rate benchmark.

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