The overall market declined continuously throughout the trading day (6-1-11). Financials led the charge downward, as the XLF posted a staggering -3.4%. The financial sector is expected to be hurt badly by loans over the next 6 months. On Tuesday the S&P/Case-Shiller Home Price Index showed a decline of -3.6%, which was more than estimated. It's a leading indicator of the housing industry's health because rising house prices attract investors and spur industry activity. The number is based on the change in the selling price of single-family homes in 20 metropolitan areas. In addition, several analysts are now stating the double-dip in housing is confirmed.
Most economic data that has come out in the last couple weeks has been poor. The US economy seems to be dragging after emerging from the world recession last year. Earlier today the ADP Non-farm Employment data showed a change of 38K vs. the 177K expected; this is the estimated change in the number of employed people during the previous month, excluding the farming industry and government. The results either a giant misstep by the economy or a grossly huge over-expectation by analysts.
All of this effects the performance of banks in the long run in terms of lending defaults. Below is a daily chart of XLF. Notice the price cross below the green 200 day moving average and today (6-1-11) ended with a very bullish candle.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.