Exchange traded funds tracking the U.S. financial sector opened the week in the red with Goldman Sachs (NYSE: GS) and JP Morgan (NYSE: JPM) dominating the banking headlines Monday.
Goldman is considering releasing documents showing a Senate subcommittee report blasting the firm in fact overstated Goldman’s bets against the housing market, The Wall Street Journal reported.
Separately, two executives on the 15-person operating committee at JP Morgan are expected to stop down, the newspaper reported.
Financial Select Sector SPDR Fund (NYSEArca: XLF) was down 0.5% in early trading Monday. JP Morgan is the ETF’s top holding at 9.2% of the portfolio while Goldman accounts for 3.9%.
Financial stocks have been underperforming the market recently amid worries the economy is losing steam. The sector ETF is down about 4% so far this year, while the S&P 500 has gained roughly 4% despite the recent pullback.
Last week, Moody’s warned it may downgrade the credit ratings of Bank of America (NYSE: BAC), Citigroup (NYSE: C) and Wells Fargo (NYSE: WFC).
“With the recent spate of economic data pointing to prolonged weakness in an already tepid recovery, positive catalysts for the banks sector appear distant,” Sterne Agee analysts said in a note Monday.
“The headwinds continue to mount for the group as housing values remain under pressure, demand for credit remains weak, and the growth outlook for the sector is subdued at this point,” they wrote. “Overall the group remains inexpensive relative to historical valuations — however, valuation alone is insufficient to provide material downside support at current levels.”
Financial Select Sector SPDR Fund
