The financial sector has seen a handsome recovery off the market’s March 9 low, with most exchange traded funds (ETFs) up at least 100% since then. But mixed fourth-quarter earnings this week raise the question: are financial ETFs the place to be right now?
The reports coming from the financial sector have been a mixed bag so far:
- JP Morgan (NYSE: JPM) had analysts’ expectations beat with fourth quarter earnings at $3.3 billion. [Financial ETFs have beat the odds for now.]
- Wells Fargo (NYSE: WFC) was a standout, reporting a quarterly profit of $3 billion. The bank raised $12 billion selling new shares in December in order to repay the $25 billion TARP loan, reports Alistair Barr for MarketWatch.
- Morgan Stanley (NYSE: MS) showed that it’s still struggling to recover, saying that a decline in trading revenue sent fourth quarter profits down to $617 million. The results were short of analysts’ projections, says Joe Bel Bruno for The Wall Street Journal.
- Bank of America (NYSE: BAC) was the most disappointing, reporting a $5.2 billion loss during the fourth quarter. The bank said the losses were the result of both consumers struggling to repay credit cards and mortgages, as well as it’s own repayment of the TARP bailout money. A year earlier, the bank lost $2.4 billion, says Ieva M. Augstums for the Associated Press.
Like the earnings reports, the trends are mixed, too. Retail financial services are still struggling as a weak housing market, unemployment and flagging consumer confidence weigh on the sector, says Kevin Grewal for The Street. [What other trends are threatening the financial sector recovery?]
The fee proposed by President Barack Obama may also weigh on the sector. Although it’s expected to generate $90 billion over 10 years, experts fear it could impact the bottom line. [How CPI numbers are not helping to boost confidence.]
For signs of the financial sector’s recovery, here are three of the many ETFs to watch.
For more stories about financial ETFs, visit our financial category.
- Vanguard Financials (NYSEArca: VFH)
- Financial Select SPDR (NYSEArca: XLF)
- iShares Dow Jones U.S. Financial Sector (NYSEArca: IYF)
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.