JPMorgan, Bank of America Lead Stock ETFs Lower

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Includes: BAC, JPM, SKF, VROM
by: Tom Lydon

All the major stock index exchange traded funds (ETFs) slumped more than 2% in their worst day in more than two months Wednesday, led lower by financial shares JPMorgan Chase & Co (NYSE: JPM) and Bank of America (NYSE: BAC).

The S&P financial sector slumped 2.6% with JPMorgan Chase and Bank of America, Dow components, among the biggest drags. JPMorgan fell 2.9% while Bank of America lost 3.4%. “It has been just one negative report on the economy after another, and now everyone is downgrading their growth expectations dramatically,” said Roger Volz, director of cash equities at BGC Financial in New York. The ProShares UltraShort Financials ETF (NYSEArca: SKF) exploded up over 6% on Wednesday.

Major automakers are on track to report weaker May auto sales than expected, as higher vehicle prices prompted consumers to put off purchases in the face of a weakening economy. The tightening supply of vehicles, especially small cars, after the Japan earthquake emboldened many companies to raise car and truck prices, a strategy that analysts and investors said had backfired. “They may have jumped on the price increases a little early when the consumer is not quite ready,” said Gary Bradshaw, a portfolio manager with Hodges Capital Management. The Global X Auto ETF (NYSEArca: VROM) bucked the overall trend and ended almost 4% higher today.

U.S. manufacturing activity expanded in May at the slowest pace in 20 months, the latest sign that a sharp rise in energy prices is hampering economic growth. The Institute for Supply Management, a trade group of purchasing executives, said its index of manufacturing activity fell to 53.5 in May from 60.4 in April. Any reading above 50 indicates growth in manufacturing. May marked the 22nd straight month of expansion in what’s been one of the few sources of strength for the economy since the recession ended nearly two years ago. Still, last month’s figure was the weakest since September 2009. And the decline from April’s pace was the sharpest one-month drop since 1984. The ProShares UltraShort Basic Materials ETF (NYSEArca: SMN) surged over 6% Wednesday.

Gregory A. Clay contributed to this article