Since the market lows on March 9, financials have rebounded handsomely, up as much as 140% since then. Most of them are perched firmly above their 200-day moving averages, as well.

There are a variety of ETFs that cover the sector. Because of the sector’s high profile, it is essential to know exactly what is under the hood of these ETFs.  The sector can be  subdivided into the following: broad-based, regional banks, capital markets, insurance and REITs.  John Gabriel of Morningstar breaks down the sector and provides an in-depth analysis of industries that constitute the financial sector.

The most widely held and common financial ETFs are broad-based financials, which include the SPDR Select Sector Financial (NYSEArca: XLF) and the Vanguard Financials (NYSEArca: VFH). Banks constitute nearly half of the asset base of XLF and 42% of VFH, insurance companies account for nearly 18% of XLF and 22.5% of VFH and capital markets soak up about 19% of both XLF and VFH.

In regard to the banking sector, some common ETFs investors look at are the SPDR KBW Bank (NYSEArca: KBE) and the PowerShares Dynamic Banking (NYSEArca: PJB). KRE is heavily exposed to banks operating in the Pacific region, nearly 25% of its assets, whereas PJB holds about 6% of its assets in this region.  Additionally, KRE is the only regional bank ETF which doesn’t hold stakes in large money center banks, whereas 10% of PJB’s assets are allocated to this specialty.

As for capital markets, investors can grab exposure to exchanges alongside brokers, money managers, and former investment banks through the SPDR KBW Capital Markets (NYSEArca: KCE) and the iShares Dow Jones US Broker-Dealers (NYSEArca: IAI). Both funds are nearly identical, except that KCE includes a sampling of traditional asset managers in its mix.

When it comes to insurance, investors can grab exposure through the PowerShares Dynamic Insurance (NYSEArca: PIC), SPDR KBW Insurance (NYSEArca: KIE) and the iShares Dow Jones U.S. Insurance (NYSEArca: IAK). The major difference between these ETFs mainly lies in their exposure to life insurers.  PIC has 3% of its assets to the subindustry, whereas KIE and IAK have 22% and 23% allocated to life insurers, respectively.

As for real estate investment trusts (REITs), the most common ETFs include the iShares Dow Jones U.S. Real Estate (NYSEArca: IYR) and the Vanguard REIT Index (NYSEArca: VNQ). A big difference between these two ETFs is that IYR contains mortgage REITs and unconventional holdings such as timber REITs and real estate services firms while VNQ limits itself to primarily conventional REITs.

In addition to knowing what an ETF holds, we suggest one watch the trendlines and have a strategy as this sector continues its recovery, as well.

For more stories on financials, visit our financial category.

Kevin Grewal contributed to this article.

The unemployment rate surged to 8.1% in February as 651,000 jobs were cut. It’s just more proof of the deepening recession. Jeannine Aversa for the Associated Press reports that the job cuts are not likely to stop anytime soon, as employers are still cost-cutting and shrinking work forces as well as freezing wages and cutting pay.

As bad as it may be, many analysts say that that the worst is yet to come. The jobs downturn is the worst than any since The Great Depression, and the steepness of the decline makes it that much more difficult to recover, reports Chris Isodore for CNN Money. Over the last six months, 3.3 million jobs have been lost. That’s the largest six-month job loss since the end of World War II.

Oil prices are on the rise as the $44 mark has been passed, and this takes the prospect of falling gasoline prices off the table for consumers. Pablo Gorondi for the Associated Press reports the dollar weakness also helped boost oil prices, although gains were limited by news that the unemployment rates are soaring.

• United States Oil (USO): down 2.5% in the last week

Wells Fargo & Co. (WFC) is slashing dividend payouts in an effort to save the bank $5 billion annually. The San Francisco-based bank said it will cut its dividend to 5 cents from 34 cents. The next dividend is expected to be declared in April, according to Sara Lepro for the Associated Press. Although Wells Fargo has long been considered one of the stronger players in the banking sector, the company has recently faced increased scrutiny from analysts and investors who are worried about its capital levels.

Concern is mounting regarding the recent acquisition of Wachovia Corp. and losses it may have incurred because of this.

• SPDR KBW Bank (KBE): down 56.7% year-to-date; Wells Fargo is 9.2%

The U.S. government is asking for a 36% equity stake in the struggling bank in exchange for $25 billion in emergency bailout money, leaving taxpayers and voters vulnerable. Martin Crutsinger for the Associated  Press reports that this deal is the third attempt for the bank in the past five months; it’s contingent on private investors agreeing to a similar swap.

The swap of $25 billion of preferred shares into common stock will expose the government to the same risks facing other holders of the bank’s common stock. Needless to say, the shares in the financial sector and for the bank have plunged upon the news.

The Federal Deposit Insurance Corp. now expects that bank failures will cost the insurance fund around $65 billion through 2013. The swirl of bank failures have depleted the FDIC’s insurance fund and caused a hike in the fees that banks pay for the insurance, and levied an emergency premium in a bid to collect $27 billion this year, reports Marcy Gordon for Associated Press.

The emergency premium, to be levied on the roughly 8,500 federally insured institutions on June 30, will be 20 cents for every $100 of their insured deposits. The past represented 6.3 cents for every $100.

• SPDR KBW Bank (KBE): down 40% year-to-date; up 21.5% for the week; Citigroup is 5.2% of assets

The latest GDP reading did little to catch the attention of investors, indicating the bad news for Citigroup has already taken center stage on most people’s minds. Gross domestic product contracted at a 6.2% annual pace from October through December, the most since 1982. Consumer spending declined the most in almost three decades, reports Timothy R. Homan for Bloomberg.

Oil prices have dipped below $43 per barrel, wiping away any gains from the slight rise above the $40 per barrel mark. Sandy Shore for the Associated Press reports benchmark crude for April delivery fell $2.42 to $42.80 a barrel in morning trading on the New York Mercantile Exchange. This drop comes after two consecutive days of gains.

• United States Oil (USO) down 38.9% over three months; up 12.2% for one week

Stocks get a lift Thursday, as part of their up and down momentum for the week, as investors speculate over the health of U.S. banks, reports the Associated Press. Both the U.S. and British governments are ready to do more for banks to cut costs and smooth out rough areas.

Meanwhile, Obama has put a $4 trillion price tag on the new budget saying that is what it will cost to run the U.S. next year. That will be a whopping $1.75 trillion more than the President expects the government to raise in revenue, creating the largest federal deficit in real dollars since the country was fighting World War II, reports Kenneth Bazzinet and Michael Mcauliff for Daily News.

Listing a series of wasteful programs that have already been found, Obama said his administration was already piling up savings in the future.

• SPDR KBW Bank (KBE) up 10% in one day; down 42.6% over three months.

New home sales are at a record low annual pace in as of January. The Commerce Department reported Thursday that sales fell 10.2% to a seasonally adjusted annual rate of 309,000, the worst showing on records going back to 1963, reports Jeannine Aversa for Associated Press. It appears that lower mortgage rates can not help trigger a buying spree for potential buyers, as the state of the economy weighs over heavier.

• iShares FTSE NAREIT Real Estate 50 (FTY) down 15.8% over three months; up 1.4% over one week.

Americans claiming unemployment benefits is over 5.1 million, more proof that the recession is hitting employers hard. The Labor Department said Thursday that first-time requests for unemployment benefits jumped to 667,000 from the previous week’s figure of 631,000, reports Christopher S. Rugaber for Associated Press.

Dell (DELL) is reporting earnings today after market close, and the one-time largest exporter in Ireland is going to shave 2,000 jobs from its force, as they make a move to Poland. Evidently workers will take cheaper wages in Poland, reports Frank Barry for Marketplace. A cut of 2,000 jobs in Ireland is a substantial number for the country, and jobless workers will either pull unemployment benefits or emigrate to find a new job. Australia seems to be the destination of choice as of now, as the recession has hit Britain hard.

Earnings reports are due out later today, after market close.

What Does It Mean? Nationalization will mean different things to different people, CNBC says. It’s as much a semantics debate as it is about political ideology.

What typically happens is that the FDIC shuts down an insolvent bank, then takes control while trying to find a buyer. The necessary capital is supplied to the new buyer and insured deposits are protected and the bank reopens under new management.

This is what’s going to happen if the current rescue measures don’t pay off.

Success Story. Sweden is one of the most popular examples of a successful nationalization. Their 1990s crisis was smaller in size and involved traditional real estate assets, but they injected capital into some institutions, separated the bad assets, replaced management, ran them and then sold them back into the market. The ultimate cost to taxpayers was low. The United States also used nationalization to resolve the savings and loan crisis of the late 1980s.

Shares Under Stress. Bank of America and Citi could be nationalized first, which is sending their shares down 20% and more. In many ways, banks have already lost control of their destinies: the government is a major investor and politicians are pushing the industry to lend, says Alistair Barr for MarketWatch.

• KBW Bank (KBE) has lost 50.6% since the first of the year; Bank of America is 7.5%; Citi is 6.3%.

Although today was a better one than a few of the others seen this week, with all this stomach-churning volatility, you almost have to wonder who is in the financial sector right now. As we’ve pointed out before, these funds are about 50% off their highs, which were reached earlier last year.

Despite announcements of a government bailout plan that will be fleshed out this weekend, there are no assurances yet that this crisis is over. No one can predict whether yet more banks will fall, or if this is all just the beginning of the end to this more than year-long mess.

The largest financial ETF, Financial Select Sector SPDR (XLF), has exposure to some of the biggest names in the news this week, including Bank of America (BAC). The fund has $7.7 billion dollars and is 47.4% off its high reached on June 1, 2007. It’s down 34.8% year-to-date.

iShares Dow Jones US Broker-Dealers (IAI) is down 51.2% since its June 15, 2007, high and is down 48.7% year-to-date. Lehman Brothers is a major holding in this fund, with 4.3% of the assets, and it has $163 million in assets.

KBW Bank (KBE) is down 40.4% off its Feb. 26, 2007, high and is down 25.2% year-to-date. It has $1.1 billion in assets.

Vanguard Financials (VFH) counts American International Group (AIG) as a top holding, with a 3.9% weighting in the insurer. It’s down 41% since hitting a high on Feb. 26, 2007, and is down 30% year-to-date.

We heartily advocate sticking to a plan – even more so in times like these when everything is so uncertain. We’ve seen it all week: a day with a more than 500-point loss, followed by a day with a huge jump, followed by a day with another big loss. Investors who stuck to the plan and chose to watch from the sidelines until the trends turn positive should be feeling decent right now.

Well, not so fast. The government’s plan isn’t fully fleshed out. They’ll be working through the weekend to work out the deatils of what could be the biggest bailout in U.S. history.

Treasury Secretary Henry Paulson said they had been acting on a case-by-case basis when it came to Freddie Mac, Fannie Mae and AIG. This morning involved taking even more powerful steps to boost confidence in the system, reports Graham Bowley for the New York Times.

Meanwhile, the Treasury has said it will guarantee money market funds up to $50 billion to ensure their solvency.

Paulson defended the cost to taxpayers, saying that it would get to the root cause of the entire problem. Allowing more market turbulence would be even more costly than this bailout plan.

Will it all work? So far, the reaction to the rumors seems to point to this being the beginning of the end, says one expert.

Investors are eager to see the bottom, but sticking to your strategy is the safest move you can make for now. When these areas being trending up again, they’ll eventually cross their 200-day moving average, meaning financial ETFs will be worth considering for your portfolio. Until then, it’s impossible to say whether the volatility we’ve seen this week is going to continue.

• Financial Select Sector SPDR (XLF), down 34.8% year-to-date
• iShares Dow Jones US Broker-Dealers (IAI), down 48.7% year-to-date
• KBW Bank (KBE), down 25.2% year-to-date
• Vanguard Financials (VFH), down 29.7% year-to-date

After the Dow Jones lost more than 340 points, Europe’s FTSE-100, Germany’s DAX and France’s CAC all fell by mid-afternoon. In Moscow, reports Louise Watt for the Associated Press, the RTS benchmark was down more than 6% to lows not seen in more than two years.

Asia wasn’t immune, either. In Japan, the Nikkei 225 sank 2.8%, while the Hong Kong Hang Seng index fell more than 2% to its lowest point in more than a year. India, Australia and Singpapore also fell sharply.

Among the funds that track these major benchmarks are:

• NETS S&P/ASX 200 (AUS), down 20.4% since April 10 inception
• NETS Hang Seng China Enterprises Index Fund (SNO), down 21% since May 22 inception
• NETS CAC40 Index Fund (FRC), down 14.9% since April 16 inception
• NETS FTSE Singapore Straits Times Index Fund (SGT), down 8.9% since July 22 inception

Obviously, market turbulence is not just confined to U.S. borders, and international markets and ETFs are showing major signs of distress. The global benchmarks are enough to make any investor wince, with negatives across the board: iShares S&P Europe 350 Fund (IEV) is down 27.5%, while the FTSE China 25 Index Fund (FXI) has plummeted 43%.

These numbers make Gary Gordon at ETF Expert ponder if the bigger bear right now is financials or international. The U.S. credit crisis has penetrated much of the globe now. Remember that the dollar has been in recovery, and that a turnaround takes much longer than a crisis. Sit tight and stay tuned, and remember to be opportunistic on an international level. Here are some other numbers:

• Dow Jones Industrials: 21% off its high of Oct. 9, 2007
• S&P 500: 21% off its high of Oct. 9, 2007
• NASDAQ: 20.7% off its high of Oct. 31, 2007

Global ETFs:

• iShares MSCI South Korea Index (EWY), 46.9% off its Oct. 31, 2007, high
• Vanguard FTSE All-World ex US ETF (VEU), 25.5% off its Oct. 31, 2007, high

Financials:

• Financial Select Sector SPDR (XLF), 44.8% off its June 1, 2007, high
• iShares Dow Jones US Financial Services (IYG), 46.3% off its Feb. 20, 2007, high
• KBW Insurance Fund (KIE), 30.8% off May 16, 2007, high

Overall, it’s a tough call. Investors should protect themselves by staying out until the trend shows up again and these funds cross above their 200-day moving averages before getting back in.

It’s led to a rebound for those funds that were left for the vultures, namely financials and homebuilders.

As assets flow out of commodities, they are becoming the blood that is giving life to financials and homebuilder ETFs, reports Joe Morris for Ignites.

There are signs that the commodities boom may be slowing down, and the U.S. dollar is re-gaining its strength, so which funds are showing a little color?

• KBW Regional Banking (KBE): down 28% year-to-date; up 0.3% in the last month
• SPDR S&P Homebuilders (XHB): down 3.2% year-to-date; up 9.7% in the last month

Another beneficiary to falling prices is short ETFs.

Short funds tracking oil, financial and homebuilding sectors have come out winners during the recent correction within commodities, reports Dow Jones NewsWires.

• PowerShares DB Crude Oil Double Short ETN (DTO): up 20.6% in the last month
• DB Commodity Double Short ETN (DEE): up 18.3% in the last month
• PowerShares DB Base Metals Double Short ETN (BOM): up 7.6% in the last month

Investors seem increasingly convinced that if the government bails them out, their shares will plunge to zero, reports Alan Zibel for the Associated Press. Fannie Mae’s CEO reassured investors that a bailout isn’t imminent, but shares are still way down midday to their lowest point in nearly 20 years.

A government bailout package was unveiled on July 13 that included a plan to provide unlimited government loads to the mortgage giants. Critics say the bailout is too open-ended and could expose taxpayers to billions in potential losses.

Financial ETFs are breaking even so far in trading today:

• iShares Dow Jones U.S. Financial (IYR), down 3.9% year-to-date
• KBW Bank (KBE), down 28.3% year-to-date
• First Trust Financials AlphaDEX Fund (FXO), down 21.9% year-to-date