Largest financials ETF sees outflows

Investors head out as bank earnings kick in

Oct 15, 2018 @ 5:46 pm

By Bloomberg News

Bank bears are back.

Investors yanked more than $1 billion from the $29 billion Financial Select Sector SPDR Fund (XLF) Friday, the largest outflow in more than a decade. In addition, trading in the fund hit $3.6 billion, more than double its average daily volume for the past year, after reaching $4.8 billion on Thursday.

Big U.S. banks have been under pressure recently as a result of struggling mortgage businesses, disappointing loan growth and concerns over international operations. With Treasury yields rising, investors worry that higher borrowing costs could hurt lending.

"The higher interest rates, the higher mortgage rates and higher gas prices mean people won't be making so many loans," said Donald Selkin, chief market strategist at Newbridge Securities. "Mortgage rates are the highest in a number of years, so the lending volume maybe won't be as strong as people thought."

Earnings season kicked off in earnest Friday, with Citigroup Inc., Wells Fargo & Co. and JPMorgan Chase & Co. posting mixed results. Bank of America reported quarterly results Monday, and debt-underwriting revenue came in worse than estimated.

The KBW Bank Index has declined for five straight sessions, losing 6.1% in that time.

But while bank stocks are struggling in the current economic environment, investors need to start figuring out if they're actually a harbinger of what's to come for the broader market, said Jim Paulsen, chief investment strategist at Leuthold Weeden Capital Management.

"People are wondering about a general slowdown — do you want to be hanging out with cyclical stocks?" he said. "If financial markets are down, it might crimp deal activity and other parts of their businesses. With rates not coming off from their recent rise, you could expect further weakness."

(More: Earnings fail to rescue equity bulls)

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

Forecasting a revolution in financial planning tools

Special projects editor Liz Skinner and reporter Ryan W. Neal discuss the technology behind financial planning software and how it is helping spur change in the adviser and investor experience.

Latest news & opinion

Finra suspends former star LPL rep who borrowed client cash

Regulator says James E. 'Jeb' Bashaw borrowed $200,000 from a client in 2013 without telling LPL.

Higher tax bills following reform surprise clients

Lower withholding and the loss of state and local deductions throw many for loop.

The drawback of Richard Thaler's 401(k)-Social Security idea? Social Security itself

Observers think Congress would need to address Social Security's funding levels and offer enhanced protections for the concept to work

Social Security funding outlook improves slightly

Retirement reserves extended one year; disability fund by 20 years

IBD report: Another impressive year

Despite a stock market decline, revenue is up. And the streak isn't expected to end anytime soon.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print