Bank exchange traded funds are moving higher with some of the sector’s top names unveiling share buybacks and dividend hikes. For example, SPDR S&P Regional Banking (NYSEArca: KRE) rallied nearly 4% on Tuesday.
In notes to customers we have mentioned the outperformance in the Financial sector in general relative to the broader market in 2012, and yesterday, the sector did not disappoint either as Financial Select Sector SPDR (NYSEArca: XLF) rallied 3.70% versus the S&P 500 Index which was up 1.80%.
Year to date, XLF is up 18.53% versus the S&P 500 which has gained 11.59%. [Bank ETFs Juiced by Fed Stress Tests]
KRE on the other hand, is up 15.16% during this same time period. It is important to note that KRE is composed of regional banking names, which are smaller in market cap than many of the money center banks that are top weightings in XLF.
Many of the holdings in XLF are also exposed to brokerage and investment banking activities as well, not just vanilla banking services. For instance, top holdings currently in KRE are SNV, BPOP, RF, STI, and SIVB while top weightings in XLF are WFC, JPM, BRK.B, C, and BAC. [Can Financial ETF Take Out 2011 High?]
XLF and KRE are both trading currently at recent highs, as KRE has not seen these levels since the spring of 2010 and XLF was here last prior to the August equity crash of 2011.
For those looking to leverage a move to the upside from current levels in a trading strategy, Direxion Daily Financial Bull 3X (NYSEArca: FAS) offers three times the daily return of the Russell 1000 Financial Services Index, while bears whom believe a pullback may be in store might look to Direxion Daily Financial Bear 3X (NYSEArca: FAZ) which is calibrated in a similar manner, only inversely correlated with the Russell 1000 Financial Services Index.
Financial Select Sector SPDR