Financial exchange traded funds (ETFs) sank lower today after a downgrade of Citigroup (C) sent the bank’s shares to a 10-year low.
Goldman Sachs said investors should sell the bank’s stock short, reports Neha Singh for Reuters. The last time its shares had traded so low was in October 1998, when Travelers Group and Citicorp merged to create Citigroup.
Goldman Sachs Analyst William Tanona said the United States’ largest bank may take $8.9 billion of writedowns from the April-June period, which would mean its third consecutive quarterly loss. He also said that Citigroup may either have to issue common stock or sell assets to raise capital.
Tanona also projected a $4.2 billion writedown in the second quarter for Merrill Lynch & Co. (MER) and downgraded the U.S. brokerage sector to "neutral," from "attractive."
Naturally, financial ETFs are down sharply today:
- iShares Dow Jones U.S. Broker-Dealers (IAI): down 29.3% year-to-date
- Financial Select Sector SPDR (XLF): down 25.3% year-to-date; Citigroup is 6.4%
- Vanguard Financials (VFH): down 21.8% year-to-date; Citigroup is 4.6%
- Rydex S&P Equal Weight Financials (RYF): down 22.5% year-to-date; Citigroup is 1.2%
Read the disclaimer, as Tom Lydon is a board member of Rydex Funds.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.