U.S. bank stocks rallied Thursday after the Federal Reserve announced hypothetical scenarios for its 2025 annual stress test that indicated smaller shocks to the economy. According to the new scenario,

The Federal Reserve announced on Wednesday it would be testing big banks against heightened stress in commercial and residential real estate markets as part of the U.S. central bank's annual stress tests.

The Federal Reserve released hypothetical scenarios for its annual stress tests, which seek to evaluate the resilience of big banks and ensure they can keep lending even in a severe recession.

The stress test changes bolster the case made by Wall Street analysts that U.S. banks will face a friendlier regulatory regime under the Trump administration.