Wall Street’s Favorite Trade Hammered in Bank Stock Meltdown

Equity investors who piled into financial stocks to ride out the harshest Federal Reserve tightening cycle in four decades are getting a reminder that surging interest rates aren’t always a blessing.

Owning lenders when yields are spiking is standard Wall Street fare — higher rates often mean higher interest income, good for financial-firm earnings. But the calculus is being upended as rising rates in the money market send depositors stampeding for better deals elsewhere, while saddling banks with losses on bond holdings that investors now worry they may need to sell.