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Bank stocks keep surging

December 17, 2012: 12:59 PM ET
bank of america

Click the chart to check Bank of America's stock.

Bank stocks have been on a tear in 2012. Monday was no different, as shares of big banks pushed the broader market higher.

Bank of America (BAC), Citigroup (C), Goldman Sachs (GS) and Morgan Stanley (MS) all climbed more than 2%, while Wells Fargo (WFC) rallied more than 3%. AIG (AIG) shares were up after the company said it plans to sell its stake in AIA Group, a Hong Kong-based life insurance company.

Financials have been on a run most of this year, and are on pace to outperform the rest of the stock market this year for the first time since the financial crisis.

Related: Post-financial crisis milestone: Banks beat market

The S&P 500 Financials index, which tracks 81 companies and also includes insurers and asset managers, is up about 24% with two weeks left in the year. That's nearly double the return of the full S&P 500, which is up nearly 13% in 2012.

The rally in bank socks gave StockTwits traders plenty to talk about.

Markets have history of following financials & consumer discretionary. Despite my doubts about economy, both fairing well lately. $XLF $XLY

The S%P 500 Consumer Discretionary index, which includes car makers, retailers, hotels and restaurants, is up nearly 20% in 2012.

$BAC Watch 10-year treasures. As the yield increases, financials make more money. That could push $XLF to new highs.

While the 10-year Treasury yield has been sitting below 2% for most of the year, it's has climbed up to around 1.7% in December from a record low below 1.4% in July.

JPM - Fully realizing the cliff seems like the least likely option & the odds of a grand bargain have risen materially in just 48 hours.

Investors have grown increasingly optimistic that lawmakers will reach a deal to avoid the fiscal cliff before the end of the year. Over the weekend, House Speaker John Boehner made an offer to raise tax rates on those making at least $1 million. While the White House said the proposal doesn't go far enough, it did say the offer is a sign of "progress."

Housing recovery theme continues to play out - homebuilders, property insurers, banks and beer hitting 52-week highs

An improving housing market means banks will enjoy more demand for mortgage loans.

$BAC is at another 52-week high. The rally here has been one of the bigger "unnoticed" stories this year. Look for div increase soon.

Bank of America is the best-performing stock of the big banks, with shares up more than 95% year-to-date. The bank has been paying a quarterly dividend of 1 cent per share since the beginning of 2009.  Prior to the financial crisis, Bank of America's quarterly dividend was 64 cents per share.

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Hibah Yousuf
Hibah Yousuf
Reporter, CNNMoney

Hibah Yousuf is a reporter at CNNMoney, where she covers stocks, bonds, commodities and currencies trading across the globe, as well as corporate earnings and other markets-related news. Prior to joining the site in 2009, she interned at Money Magazine.

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