As financials continue to struggle, related exchange traded funds (ETFs) may feel the repercussions.

Yesterday, financials continued to decline as Merrill Lynch (MER) shares dropped almost 10%, bringing the entire sector lower amid fears over credit quality and the housing sector.

Today, things are looking a little brighter, as most ETFs in the sector are up once again. For example, the Financial Select Sector SPDR (XLF) is up by more than 4% midday.

Over the weekend, U.S. lawmakers passed a rescue package targeted to help struggling homeowners and boost the confidence in mortgage giants Fannie Mae and Freddie Mac. However, as Elinor Comlay reports for Reuters, this bill will take time to go into effect and will more than likely not cure the housing crisis because of the many difficulties financials are facing.

Despite Congress passing this rescue package for Fannie Mae and Freddie Mac, the rest of the industry will be left fighting for themselves as the grim outlook for consumers and the economy persists. In talking with CNBC, Kathy Boyle expresses her main concern as simply being that we are not finished yet. She explains, “Wall Street would like to think that the worst is over , but we’ve been saying that for a while.”

As the current state of affairs in financials is ever-changing, some ETFs to cover both ups and downs a may be:

• Rydex Inverse 2x S&P Select Sector Financial (RFN), launched July 18
• UltraShort Financials ProShares (SKF), up 33.1% year-to-date
• Ultra Financials ProShares (UYG), down 50% year-to-date

Read the disclosure, as Tom Lydon is a board member of Rydex Funds.

Tags: Financial, RFN, Sector ETFs, SKF, UYG