Exchange traded funds indexed to large banks such as Bank of America (NYSE: BAC) and Citigroup (NYSE: C) fell sharply late Wednesday after Fitch Ratings warned U.S. lenders are at risk if the Eurozone sovereign debt crisis worsens.
“Unless the Eurozone debt crisis is resolved in a timely and orderly manner, the broad credit outlook for the U.S. banking industry could worsen,” Fitch said.
Financial Select Sector SPDR (NYSEArca: XLF) ended Wednesday with a 2.5% loss and was lower in Thursday’s premarket trading. The financial ETF is down nearly 20% year to date.
Europe’s debt crisis was back in focus Thursday after Spanish bond yields rose to their highest level since the establishment of the euro after a weak auction.
“Tensions are increasing on Spain for sure even as rates remain sustainable for the moment,” Laurence Boone, chief European economist at Bank of America Merrill Lynch in London, told Bloomberg. “This is not necessarily due to Spain itself, but more to the lack of a solution at the European level.”
Financial Select Sector SPDR
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