A Little Assurance Goes a Long Way for Financial ETFs

July 16, 2008 at 2:00 pm by Tom Lydon

Financial-related exchange traded funds (ETFs) surged today after Federal Reserve Chairman Ben Bernanke said Fannie Mae and Freddie Mac were in no danger of failing.

It was his second day of testimony about the state of the ailing U.S. economy. It was less downbeat than yesterday’s testimony. Bernanke said the two mortgage giants, which hold or guarantee more than $5 trillion in mortgages, were adequately capitalized, reports Jeannine Aversa for the Associated Press.

The rescue plan seemed to rattle nerves, but the intent was to signal to investors around the world that the government is prepared to do whatever it takes to keep the credit crisis from engulfing the financial markets.

Shares for Wells Fargo (WFC) delivered a shot of good news today, reporting a profit drop that was not as big as had been expected. Its quarterly dividend was up by 10%, as well, reports Madlen Read for the Associated Press. Many other financial institutions are slashing their dividends in order to preserve capital.

The San Francisco-based bank has weathered the storm better than its rivals, partially because it didn’t have as much exposure to subprime mortgages.

Bernanke’s assurances and Wells Fargo’s numbers combined to make unleveraged financial ETFs the superstars in today’s markets, including:

  • Regional Bank HOLDRs (RKH): down 42.3% year-to-date; Wells Fargo is 13.7%
  • KBW Bank (KBE): down 43.7% year-to-date; Wells Fargo is 9.3%
  • iShares Dow Jones U.S. Regional Banks (IAT): down 39.3% year-to-date
  • KBW Regional Bank (KRE): down 38.1% year-to-date
  • Rydex S&P Equal Weight Financial (RYF): down 37.7% year-to-date; Wells Fargo is 13.7%

Tags | , , , , , ,

Subscribe

Enter your e-mail address below to sign up for our free e-mail newsletter, the Daily Market Update. We will never share your e-mail address with third parties.

Leave a Reply

    • Paul: looking for a vietnam etf
    • Tom Lydon: Hi Gordon, Absolutely. Commodities experienced a big correction this summer! Many of these funds have...
    • gordon smith: Even In These Markets, You Can Still Find ETF Movers and Shakers—where are we today…most...
    • Andy: You have to be careful when choosing your asset allocation. Many people are under the impression that you get...
    • Andy: There is a useful tool at http://www.assetcorrelation.co m that lets you check the degree of correlation...

Recent Podcast

Tom Lydon Talks About iMoney, ETFs and Why You Should Own Them

 
 Tom Lydon on FT Press - August 11, 2008: Play Now | Play in Popup | Download