Financial stocks and exchange traded funds (ETFs) are trading in the red Thursday after ratings firm Moody’s Investor Service cut debt ratings on three of the largest U.S. banks.
Financial Select Sector SPDR Fund (NYSEArca: XLF) was down 1.12% at last check.
Moody’s downgraded long-term credit ratings on Bank of America (NYSE: BAC) and Wells Fargo & Co. (NYSE: WFC), and the ratings firm also downgraded short-term ratings on Citigroup Inc. (NYSE: C), report Hugh Son and Dakin Campbell for Bloomberg.
The U.S. government is “more likely now than during the financial crisis to allow a large bank to fail should it become financially troubled, as the risks of contagion become less acute,” according to Moody’s. [Financial ETFs Can’t Seem to Shake the Blues]
Citigroup maintained its long-term credit rating because of “an improvement in the bank’s stand-alone credit profile,” Moody’s stated. Liquidity has “strengthened significantly in the past two years and is robust.”