Financials go on sale in January
The financial sector is off to a worse start to the year
than even the energy names, with the XLF down 3.9% YTD vs. the XLE's 3.2%
decline. The S&P 500 is roughly flat. The SPDR KBW Bank ETF (NYSEARCA:KBE)
is off 7.5%, and the Regional Bank ETF (NYSEARCA:KRE) is lower by 6.9%.
Q4 earnings results haven't been wonderful, but financial
names had been savaged well before those reports started coming out. Instead
there's a difficult regulatory regime that won't quit, and - for now - it's
looking like "wait'll next year" for the rising interest rates that
were supposed to drive profit margins higher. The 10-year/2-year spread -
already pretty low at 150 basis points to start the year - has narrowed to 137
bps.
A partial roll call of banks: Bank of America (NYSE:BAC)
-12.1% YTD, Citigroup (NYSE:C) -10.1%, JPMorgan (NYSE:JPM)
-9.4%, Morgan Stanley (NYSE:MS) -9.4%, Regions Financial (NYSE:RF) -14.7%,
KeyCorp (NYSE:KEY) -4.5%, PNC
Financial (NYSE:PNC) -5.4%, Bank of New York
(NYSE:BK) -9.1%, Capital One (NYSE:COF) -6%,
Discover (NYSE:DFS) -13.6%.
Other spread-starved sector names: MetLife (NYSE:MET)
-9.8%, AIG (NYSE:AIG)
-8%, Prudential (NYSE:PRU) -10.8%, Schwab (NYSE:SCHW) -9.9%.
Some of what's working in financials: Blackstone (NYSE:BX)
+6.7%, E*Trade (NASDAQ:ETFC) +1.2%, WisdomTree (NASDAQ:WETF) +12.3%, Legg Mason
+2.8%.
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