Financial exchange traded funds (ETFs) continue to get bombarded with news related to the credit crunch. Take for instance the latest, Bank of America (BAC) has taken a $2 billion equity stake in mortgage lender Countrywide Financial (CFC). CFC’s stock was up following the announcement. Countrywide finances about one of every six mortgages in the U.S., according to Seeking Alpha’s Wall Street Breakfast segment. This news came about the same time that Lehman Brothers (LEH) declared it’s closing a subprime lending business, and Capital One Financial (COF) said it’s closing its GreenPoint mortgage unit. Also in Seeking Alpha’s Wall Street Breakfast:
- Citigroup (C), JPMorgan Chase (JPM), Bank of America (BAC) and Wachovia (WB)announced yesterday that they each have borrowed $500 million with the Federal Reserve’s discount rate.
- Mortgage lender Accredited Home Lenders Holding (LEND) announced yesterday that it is no longer accepting new mortgage applications and will cut 1,600 jobs. The layoffs will affect 62% of the company’s staff and will lead to the closure of 60 retail branches and 10 wholesale offices.
- The FDIC reported yesterday that U.S. bank profits dropped 3.4% in the second quarter on increased defaults. Also, earnings dropped to $36.7 billion from $38 billion at the same time last year. Past-due loans and leases increased 10.6% from last year, which is the fifth quarterly rise in a row and the steepest quarterly rise since 1990.
Some ETFs to watch that could be affected by this news include:
- KBW Bank ETF (KBE)
- KBW Capital Markets ETF (KCE)
- PowerShares Dynamic Banking (PJB)
- Financial Select Sector SPDR (XLF)
- First Trust Morningstar Dividend Leaders Index (FDL)
- Regional Bank HOLDRs (RKH)
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.