Financial exchange traded funds have rallied this week on news Bank of America (NYSE: BAC) is in an $8.5 billion mortgage-putback settlement while payment card companies surged after a favorable ruling from the Federal Reserve.
Financial Select Sector SPDR Fund (NYSEArca: XLF) soared 2% on Wednesday, lifted by a 3% rally in Bank of America on hopes the mortgage settlement will clear some of the uncertainty hanging on the stock. [Financial ETFs Rise]
Separately, the Fed on Wednesday voted to raise the cap on interchange fees to 21 cents per transaction, up from the 12-cent limit it had proposed earlier. Shares of Visa (NYSE: V) and MasterCard (NYSE: MA) jumped more than 10% Wednesday.
“In a partial victory for banks, the Fed backed off its proposed $0.12 maximum per-‘swipe’ debit card fee rule, and issued a final ruling that will allow banks to charge a three-part fee that adds up to $0.27 per transaction,” Miller Tabak analysts wrote in a note Thursday. “Directionally, this is a relief for many banks.”
Banks need all the help they can get as their shares have been under pressure this year. The financial ETF remains in negative territory for 2011 despite the recent bounce.
Financial Select Sector SPDR Fund “has been on a road to nowhere for almost two years now,” StockCharts.com said Thursday.
Over the past two years, the ETF has traded in a range of roughly $13 and $17 a share. The sector fund has crossed the midpoint at $15 a share at least 10 times since September 2009, according to the report. [Financial ETFs Lag on Headline Risk]
“This could be a big moment for the beleaguered sector. XLF has been underperforming the S&P 500 since August 2009,” StockCharts.com said, adding that recent relative weakness “is not a good sign.”
The ETF “must hold” at established short-term support at $14.50 a share, and a break below that level “would open the door to support in the $13-$13.50 area,” according to the report. “On the upside, the February trendline and late May high mark an important resistance hurdle. A breakout here would be quite positive and open the door to an assault on the 2010-2011 highs.”
Financial Select Sector SPDR Fund
