The KBW Capital Markets (KCE) exchange traded fund (ETF) lost 2.3% in trading today, sending the fund to a six-week low. The fund is down 22.3% year-to-date.

The BKX index of 24 major bank stocks also fell to a five-year low,
sending it below the lowest close it reached in March when the financial
system was close to melting down, reports Money & Co.

Accelerating KCE’s slide was Standard & Poor’s ratings cut on a number of its holdings, reports Tomi Kilgore for Thomson Financial News. Those include Morgan Stanley (MS), Merrill Lynch (MER) and Lehman Bros. (LEH).

S&P said the outlook for large financial institutions is now mostly negative. In addition to the $350 billion in global subprime mortgage-related losses, those institutions have the potential for yet more writeoffs, Reuters reports.
 
The financial sector wasn’t helped this morning by shakeups at both Wachovia (WB) and Washington Mutual (WM), either.

Other ETFs affected by the activity today:

• Financial Select Sector SPDR (XLF), down 13.8% year-to-date
• iShares Dow Jones US Broker-Dealers (IAI), down 22.2% year-to-date
• Vanguard Financials (VFH), down 11.7% year-to-date
• Regional Bank HOLDRs (RKH), down 12.8% year-to-date
• PowerShares FTSE RAFI Financials (PRFF), down 14.2% year-to-date

Tags: Financial, Sector ETFs