An exchange traded fund indexed to U.S. banks was down over 2% on Monday following mixed quarterly earnings from bellwethers Citigroup (NYSE: C) and Wells Fargo (NYSE: WFC).
The $951 million SPDR KBW Bank ETF (NYSEArca: KBE) fell 2.3% at last check.
Wells Fargo shares slipped almost 6% after the bank’s third-quarter profit missed consensus estimates. Evercore Partners analysts blamed the miss on lower market-sensitive revenue and lower core mortgage banking results.
“Overall, it was a tough quarter for Wells Fargo’s [net interest] margin and we would expect the stock to be weak,” added Keefe, Bruyette & Woods.
Citi shares were fractionally positive after the company reported higher quarter earnings.
The bank ETF is trying to hold its 50-day moving average, a key technical indicator. JP Morgan kicked off bank earnings last week.
Analysts are looking for relative improvement in the financial sector for signs the recent rally marks a bottom in stocks. [Stock ETFs Try to Break Trading Range]
“A further move higher in the financials will validate a continued rally, as confidence in the global financial system is an important key to economic growth,” one strategist noted. “And if that confidence wanes in the coming weeks, markets may find themselves in the familiar position of yet another Near Death Experience.” [Financial ETFs]
The bank ETF was down 26.2% year to date as of Oct. 14, compared with a 1.1% loss for the S&P 500, according to investment researcher Morningstar.
SPDR KBW Bank ETF