The woes for the financial and homebuilding sectors continued today, while related exchange traded funds (ETFs) differed in their reactions.

  • Bank of America (BAC) announced job cuts of 7,500 upon closing its acquisition of Countrywide (CFC) next week, reports Ieva M. Augstums for the Associated Press. The deal gives Bank of America control of 20% to 25% of the home loan market. Countrywide was done in by a rash of bad loans, plus the housing slump and credit crisis.
  • An analyst at Lehman Brothers says Merrill Lynch (MER) is likely to post $5.4 billion in writedowns for the second quarter, report Elinor Comlay and Tenzin Pema for Reuters. It’s the highest estimate on Wall Street, and the lowest estimate is $3.5 billion.
  • American International Group (AIG) said it plans to absorb losses for a dozen insurance units after securities-lending accounts lost $13 billion tied to the collapse of the subprime-mortgage market, says Miles Weiss for Bloomberg.

Financial ETFs have been among the hardest-hit year-to-date, and in midday trading, some are down nearly 2%:

  • Financial Select Sector SPDR (XLF): down 28% year-to-date; Bank of America is 8.1%; AIG is 5.6%
  • iShares S&P Global Financials (IXG): down 23.6% year-to-date; Bank of America is 2.6%; AIG is 1.7%
  • KBW Insurance (KIE): down 20% year-to-date; AIG is 6.9%


In the homebuilding sector, KB Home (KBH) announced a quarterly loss of $255.9 million. Last year, the nation’s fifth-largest homebuilder lost $148.7 billion in the same quarter, reports Scott Malone for Reuters.

Homebuilder ETFs were up slightly in trading today:

  • SPDR S&P Homebuilders (XHB): down 11.3% year-to-date; KB Home is 3.9%
  • iShares Dow Jones US Home Construction (ITB): down 15.8% year-to-date; KB Home is 5%


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.

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