LPL share price soars to record high

Boosted by the potential for further interest rate hikes this year, shares of LPL Financial Holdings Inc. continued to fly on Thursday, hitting a new high of $220.80, according to market data from CNBC.com, before falling back to $205 after 1 p.m.

Shares of LPL Financial Holdings (LPLA) have beaten the competition this year. Close to noon on Thursday, shares of LPLA were up 30% for the year to date, while the S&P 500 Index posted a decrease of 6% over that period. And shares of the iShares U.S. Broker-Dealers & Securities Exchanges ETF (IAI) were trading at $97.50, down more than 12% for the year.

LPLA shares are owned by that ETF.

A spokesperson for the company did not return a call to comment. The company will release its first-quarter earnings next Thursday.

LPLA has been on a tear since March 7, when it hit its most recent low of $143.48; the stock is up more than 50% since then.

That was nine days before the Federal Reserve, trying to soften inflation, approved a quarter-point rate hike, its first increase since December 2018. More rate hikes are anticipated.

Interest rate hikes are good news for broker-dealers, which charge clients interest for borrowing on margin and capture the interest-rate spread on the cash that clients hold in money market accounts. 

LPL Financial had $57 billion in client cash balances at the end of last year. It also recruited advisers with $89 billion in assets last year, more than double the amount in 2020.

Share prices of brokerage firms like LPLA are traditionally volatile and swing on a number of factors, not just interest rates. The brokerage industry is an inherently risky business.

But market sources, who asked not to be named, indicated that LPLA shares have not recently been boosted by speculation that the company is in discussion to be acquired.

The company's rising share price is an interest-rate play, those sources said.

And San Francisco Fed President Mary Daly said Thursday that she sees the case for moving quickly to raise rates this year because inflation remains high, according to Yahoo Finance.

"I like to think of it as expeditiously marching toward neutral. It's clear the economy doesn't need the accommodation we're providing," Daly told Yahoo Finance in an interview.

The Fed hopes that raising borrowing costs will dampen the consumption and spending that has pushed prices higher, according to Yahoo Finance.