Financial ETFs Fall on Renewed Worries About the Sector

May 28, 2008 at 2:00 pm by Tom Lydon

Worried_2 Worries about the financial sector were renewed today, and those concerns pulled down its related exchange traded funds (ETFs).

Several banking stocks were lower, including American International Group (AIG). Citigroup (C) said the world’s largest insurer may need even more capital in addition to the $20 billion it raised last week. KeyCorp (KEY) said losses could mean double the write-offs it had predicted.

Further heightening concerns, J.P. Morgan cut its profit view on three U.S. investment banks, reports Jennifer Coogan for Reuters. Those banks are Lehman Brothers (LEH), Morgan Stanley (MS) and Goldman Sachs (GS). J.P. Morgan also suggested investors avoid the brokerage sector, saying that earnings estimates continue to look too bullish.

Financial ETFs were down sharply today, as some of the funds count these firms as a top holding.

Among the ETFs affected:

Regional Bank HOLDRs (RKH): down 11.7% year-to-date; KEY is 2.4%
Financial Select Sector SPDR (XLF): down 14.6% year-to-date; Citigroup is 6.4%; AIG is 5.6%; Goldman Sachs is 3.7%; Morgan Stanley is 2.6%; Lehman Brothers is 1.1%
PowerShares FTSE RAFI Financials (PRFF): down 14.3% year-to-date; Citigroup is 9.9%; AIG is 4.9%; Morgan Stanley is 2.5%; Goldman Sachs is 1.9%; Lehman Brothers is 0.9%