ETF Trends
ETF Trends

Financial exchange traded funds slipped Wednesday morning as Bank of America (NYSE: BAC) and Wells Fargo (NYSE: WFC) led the decliners in bank stocks and credit fears rippled through global markets.

Financial Select Sector SPDR Fund (NYSEArca: XLF) fell 0.7% in preopen trade, while B. of A. dropped 1.7% and Wells Fargo declined 1.1%. The financial ETF rallied with the overall market last week but is still in negative territory for 2011.

The New York Post reported Wednesday that mortgage servicers are nearing a deal with federal and state officials to settle foreclosure-related claims. The deal would settle most claims against Bank of America, JP Morgan (NYSE: JPM), Wells Fargo and Citigroup (NYSE: C), according to the report.

“Bank stocks continue to lag the broader market as investor apathy toward the sector has weighed on valuations and price performance,” Sterne Agee analysts wrote in a recent report on the sector.

“Although uncertainty surrounding required capital levels is beginning to fade, concerns surrounding the persistently weak economy, pressured real estate values, and a tepid growth outlook have taken the forefront,” they added. “While continued asset quality improvement and capital redeployment will likely be a focus, tangible catalysts for bank stocks appear distant.”

The financial sector ETF lost nearly 1% on Tuesday and lagged the broader market. [Banks Sap Financial Sector]

Investors are hoping a recent Bank of America mortgage settlement will lift some of the uncertainty dogging the stock, which is down nearly 20% year to date and weighing on financial ETFs. [Will Mortgage Settlement, Card Fees Revive Financial ETFs?]

“While we’re not pleased to see losses continue at [Bank of America], we think the settlement, along with the other announced charges, is a yet another much-needed step toward putting many of the company’s past mistakes behind it,” Morningstar’s Jim Sinegal said in an analyst note on the company.

Financial Select Sector SPDR Fund

Bank of America

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The opinions and forecasts expressed herein are solely those of John Spence, 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.