Financial exchange traded funds tracked the market lower Wednesday as investors worried about the impact of a guilty verdict for Raj Rajaratnam on insider trading charges, and banks’ exposure to mortgage losses.
Bank stocks continue to underperform on negative data on the U.S. housing market, Sterne Agee analysts said in a research note.
“While investor expectations have been scaled back since first-quarter earnings, the slow economic recovery will likely keep valuations in check at least over the near-term,” the analysts wrote. “Moreover, we believe that the legacy mortgage issues and investor sensitivity to persistent headline risk will continue to weigh.”
Wednesday’s sell-off erased the financial ETF’s gains this week following Citi’s reverse stock split.
The sector ETF is trading below its 50-day moving average.
Financial Select Sector SPDR Fund