(Bloomberg) -- US bank stocks rallied this week, rebounding from their lowest level in three years, as investors snapped up shares of the beaten-down sector amid hopes the Federal Reserve is done raising interest rates.

The KBW Bank Index jumped 3.1% on Friday, its fifth straight session in the green and second consecutive day with a move of 3% or more. Its advance this week, which comes on the heels of the gauge sliding below the lows seen during the depths of the regional banking crisis earlier this year, reached 11% — the best such performance since November 2020.

Banks added to their gains on Friday after cooler-than-expected jobs data bolstered bets that the Fed’s hiking cycle may be done and that the central bank may start cutting rates sooner than had been expected. Such a pivot could ease concerns over deposit costs and credit quality for the banking industry. 

Read more: Fed Hiking Cycle Looks Done After US Jobs Report Shows Cooling

The sector has come under pressure this year amid the regional bank failures, proposals for heightened capital requirements, deteriorating credit and broader economic uncertainty.

“A higher-for-longer rate environment could pressure deposit and funding costs over a longer timeframe,” Wedbush analyst David Chiaverini wrote in a Friday note recapping earnings season. “Credit quality early indicators are beginning to flash a yellow signal.”

The 2023 rout for banks has left the KBW Bank Index sharply trailing the S&P 500 Index’s rally amid the challenging environment. There’s become a “dichotomy” between where bank stocks are trading and the sanguine tone being struck by management teams, Wells Fargo analyst Mike Mayo wrote in a note about an industry conference this week.

Read More: Mayo Calls Upbeat Bank Executives ‘Out of Sync’ With Stock Pain

Regional banks — which were caught up in tumult of March when Silicon Valley Bank failed — have seen an equally strong rebound this week, bolstered by bullish comments from Bill Gross. 

The co-founder and former chief investment officer of Pacific Investment Management Co. said in a Thursday post on X that the group’s “falling knife has hit bottom,” and that he’s buying shares of Truist Financial Corp., Citizens Financial Group Inc., KeyCorp and First Horizon Corp.

(Updates moves throughout to market close and adds Mike Mayo commentary.)

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