Financial ETFs Sink Following Earnings

January 19th at 8:30am by Tom Lydon

ETFs wobbled mostly lower on Wednesday after Goldman Sachs (NYSE: GS) reported a sharp earnings drop and housing data proved mixed, denting cheer over strong financial results from Apple (NASDAQ: AAPL) and IBM (NYSE: IBM).

  • Builders started work on fewer homes and apartments last month than November and at the slowest pace since October 2009. Builders broke ground on a total of 587,600 homes in 2010, just barely better than the 554,000 started in 2009. Those are the two worst years on records dating back to 1959. And the pace is getting worse. The Commerce Department reported Wednesday that builders started work at a seasonally adjusted annual rate of 529,000 new homes and apartments last month. That’s a drop of 4.3% from November. The SPDR S&P Homebuilders ETF (NYSEArca: XHB) is off 1% today.
  • Shares of Goldman Sachs (NYSE: GS) are down more than 2% after the firm reported earnings fell 53% in the fourth quarter because of sharp declines in its investment banking businesses. As a result, financial ETFs are getting hit hard, but ProShares Short Financials ETF (NYSEArca: SEF) is up more than 1% today.
  • After Tuesday’s closing bell, Apple said first-quarter revenue jumped more than 70% to $26.74 billion on strong holiday sales of the iPhone and iPad.  Apple shares are up more than 1% one day after disclosing that Chief Executive Steve Jobs would be going on another medical leave — this time for an undetermined period. International Business Machines Corp.’s quarterly profit climbed 10%, as businesses demonstrated strong demand for the company’s computer hardware, the technology giant reported Tuesday. iShares Dow Jones U.S. Technology (NYSEArca: IYW) is down just slightly; Apple is 13.8% of the fund and IBM is 8%.
  • Wells Fargo & Co. (NYSE: WFC) reported a 21% jump in fourth-quarter profit Wednesday, as the banking and mortgage giant continued to generate lots of fees from originating home loans. Quarterly net income came in at $3.41 billion, or 61 cents a share, up from $2.82 billion or 8 cents a share, earned in the final three months of 2009. The San Francisco-based bank is down approximately 1.5% today, but you can play the long trend with SPDR KBW Bank ETF (NYSEArca: KBE); Wells Fargo is 7%.

Gregory A. Clay contributed to this article.

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.