More news about the financial sector sent Wall Street and related exchange traded funds (ETFs) lower, but a further drop in oil prices helped soothe some investors.

JP Morgan (JPM) said it had racked up bigger losses in its mortgage holdings so far in the third quarter than in the second quarter, reports Tim Paradis for the Associated Press. Goldman Sachs then came out with lowered ratings and earnings estimates for the investment bank.

Meanwhile, UBS (UBS) said it would separate its investment bank from its wealth management arm. The banker admitted that there were problems with keeping both businesses integrated, say John O’Donnell and Sam Cage for Reuters. UBS lost $41 billion in the second quarter, as rich clients moved their money to rivals that include smaller Swiss banks.

Oil fell slightly to below $113 a barrel, buffeted by differing views on whether global demand is up or down, and tension between Russian and Georgian troops.

The U.S. trade deficit unexpectedly dropped as exports hit an all-time high. The deficit of $56.8 billion is the smallest in three months, and better than the $61.5 billion Wall Street had forecast, reports Martin Crutsingrer for for the Associated Press.

The markets over all and most financial-related ETFs are down in trading this morning:

• KBW Bank (KBE), down 18.1% year-to-date
• iShares Dow Jones U.S. Financial Services (IYG), down 21.5% year-to-date
• Vanguard Financials (VFH), down 18.4% year-to-date
• Rydex S&P Equal Weight Financial (RYF), down 20.1% year-to-date

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

Tags: Energy, Financial, IYG, KBE, Oil, RYF, Sector ETFs, VFH