Financial exchange traded funds followed key holding Bank of America (NYSE: BAC) lower Friday as the banking sector can’t seem to get in gear and join the market rebound.
Financial Select Sector SPDR Fund (NYSEArca: XLF) was down fractionally in afternoon dealings. The ETF has lost 18.5% year to date. [Financial ETFs Lag Market in 5-Week Bounce]
Bank of America, the market’s most active stock by share volume, fell nearly 2.3% in recent action.
Bank stocks have underperformed in recent weeks as U.S. Treasury yields decline.
“Over the past several weeks, U.S. economic data have weakened materially,” said Sterne Agee analysts in a recent note. “Combined with commentary from the Federal Reserve on a sustained period of low rates and ongoing uncertainty out of Europe, U.S. Treasury securities have rallied significantly, sending yields to generational lows.”
The financial sector is “a perennial underperformer,” said Tarquin Coe, technical analyst at Investors Intelligence. “The ratio against the S&P 500 has been moving south since late 2009. Longer-term they have been weak for the past decade.”
The analyst noted the financial ETF has encountered resistance at its 30-day exponential moving average.
“This level has effectively contained the downtrend since April. Similar tests in August were followed by sharp downtrend reassertions,” he said in a newsletter Friday.
In U.S. large-cap stocks, the S&P 500 was testing its 50-day exponential moving average on Friday.
