Financial exchange traded funds were the worst-performing sector ETFs on Friday as Citigroup (NYSE: C) and J.P. Morgan (NYSE: JPM) led shares of big banks to the downside.
Financial Select Sector SPDR Fund (NYSEArca: XLF) was down nearly 1% while the main stock indexes were down slightly. Financial ETFs are also trailing the overall market in 2011, essentially trading where they started the year.
Citi shares slipped nearly 1% Friday while J.P. Morgan was down 1.5% in recent action. Citi on Friday reinstated a quarterly dividend of a penny a share.
Big banks have been such poor stock performers that they have capped the gains in the Dow Jones Industrial Average this year. [Bank of America Trips Dow ETF]
However, some analysts think deal activity in the beaten-down financial sector could help turn its fortunes around. Keefe, Bruyette & Woods on Friday said Wells Fargo (NYSE: WFC) may fire the first shot.
“We believe Wells may be a first-mover among large banks in returning to M&A. The firm’s first-quarter balance sheet was very liquid with strong capital, yet revenue starved,” KBW said in a report. “In our view, Wells Fargo could likely pursue a stock or insurance brokerage firm or specialty lenders through M&A.”
Wells Fargo is the second-largest holding in the financial ETF at about 8% of assets.
Financial Select Sector SPDR Fund
