Bank Concerns Hit Stocks, ETFs for a Third Day

President Barack Obama’s proposal to restrict banks on size and what kinds of trades they can make gave the markets a case of the nerves and sent many exchange traded funds (ETFs) lower for a third straight day.

The market’s jitters came despite upbeat earnings from McDonald’s (NYSE: MCD) and General Electric (NYSE: GE). Obama’s proposal to change the rules on Wall Street has critics raising many fears, including:

• Some feel the plans won’t work at all to prevent another financial crisis
• Others believe the plans would limit the ability for banks to make profits and increase lending
• There are also concerns that they would put a crimp in banks’ competitiveness in the global marketplace

As a result of the worries, financial ETFs have taken a beating this week: Financial Select Sector SPDR (NYSEArca: XLF) is down nearly 4% this week, plus another 1% so far today. The iShares S&P Global Financials (NYSEArca: IXG) is down 6.5% this week, plus nearly 1% today. [Why regional banks could come out ahead.]

General Electric, an earnings season bellwether, reported a 19% drop in fourth-quarter profits. The numbers may sound bad, but they beat analysts’ expectations. Most of the decline was because of weakness in both its finance division as well a NBC Universal, reports Bob Sechler for The Wall Street Journal. GE sounded an upbeat signal after announcing earnings, saying it expected to return to growth in 2011. Vanguard Industrials (NYSEArca: VIS) is up slightly this morning. The fund holds 13.8% of GE. [For more stories on industrials, visit our category.]

McDonald’s reported higher profits in the fourth quarter, thanks to robust sales in overseas markets. Sales at American stores rose 1% last month after two months of declines, and its fourth-quarter profit was $1.22 billion. Globally, same-store sales jumped 2.3% in the fourth quarter, reports Reuters. PowerShares Dynamic Food & Beverage (NYSEArca: PBJ) is up 0.7% this morning; McDonald’s is 5.2%. [For more stories on food and beverage, visit our category.]

More big names will be announcing earnings next week. Look for reports from Apple (NASDAQ: AAPL), Texas Instruments (NYSE: TXN), Delta Airlines (NYSE: DAL), Gilead Sciences (NASDAQ: GILD), Yahoo (NASDAQ: YHOO), Microsoft (NASDAQ: MSFT) and Johnson & Johnson (NYSE: JNJ).