The financial sector and exchange traded funds (ETFs) have seen some rough times this year.

But coming off news of July’s rebound is a round of news this morning that seems to have things picking up for the sector once again. We reiterate, though, what while things do seem to be picking up, investors would be wise to wait until this sector once again travels above its trend line before jumping back in.

  • UBS (UBS) reached a $19.4 billion agreement to buy back bonds, reports the Associated Press. It’s the biggest settlement yet after claims that banks misled investors to buy auction-rate securities. Yesterday, Citigroup (C) agreed to buy back $7 billion of such securities, while last week, Merrill Lynch (MER) said it would buy back $12 billion of them.
  • Fannie Mae (FNM) posted a second-quarter loss that was three times what Wall Street had expected. The $2.3 billion loss is blamed on rising defaults and foreclosures, and it has forced the mortgage giant to make cutbacks, reports Alan Zibel for the Associated Press. The good news is that Fannie Mae predicts the worst of it will be over by the end of this year. But it still cautions investors that losses could still remain through the current quarter as it tries to unload foreclosed homes and restructure loans.
  • MBIA (MBI) notched a $1.7 billion profit in the second quarter, wildly beating analyst estimates. But the world’s largest bond insurer is having trouble getting new business since losing its top debt ratings, reports Christopher Kaufman for Reuters.

ETFs that are feeling the better vibes this morning include:

  • Rydex S&P Equal Weight Financials (RYF), down 24.5% year-to-date
  • Financial Select Sector SPDR (XLF), down 25.4% year-to-date
  • First Trust Financials AlphaDEX (FXO), down 19.8% year-to-date
  • iShares Dow Jones US Financial Sector (IYF), down 23.1% year-to-date


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.