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).
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.