Week in Review: Financials in Downtrend 2 comments
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Despite a roller coaster at the stock market last week, in which the FED decided to hold interest rates steady, the Nasdaq finished the week with a small gain of 0.6% followed by the the Dow with 0.4%, and the S&P 500 with 0.03%. The Russell 2000 posted even a small loss of -0.2%. However, the wild ups and downs in the VIX last week indicate that the market participants are still nervous.
This week’s top performing sectors on a relative basis were last weeks poorest performing sector Utilities and Health Care with a gain of 1.56% and 1.37% respectively. The poor sector performers were Materials with a loss of 1.45% and Energy with a decline of 1.32%.
The chart of the normalized ratio of the Financials SPDR (XLF) reveals that the Financial Sector is in a downtrend since January and the Materials Sector (XLB) is still trying to break out above its relative highs in the first quarter of the year. The shaded areas represent two standard deviations above and below the SPDR’s 50-day moving average.

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This article has 2 comments:
In my opinion the resent sell off is mainly due to the current problems in the mortgage sector, especially the mortgage backed securities (for example see the near collapse of the Bear Stearn's hedge fund due to mortgage losses). I think market participants are currently demanding a higher risk premium for financial stocks because of the uncertainties in regard to a possible "mortgage implosion" and it's effect on the financial sector.