The $4.7 billion Financial Select Sector SPDR (NYSEArca: XLF) is down 7.2% over the past month, doubling the loss of the S&P 500. The financial sector ETF is off 22.8% year to date, compared with a 3.4% decline for the S&P 500, according to investment researcher Morningstar.
“For the S&P 500 to rally, it doesn’t necessarily need financials to lead, the market just needs the banks to stop going down. Stability more than anything else,” Parets said.
The financial ETF lost 2.5% on Monday on worries over banks’ exposure to Europe’s debt crisis and fallout from the “supercommittee” budget failure.
Bank of America has been warned it could face an enforcement action if regulators aren’t convinced the company has done enough to strengthen its financial position, The Wall Street Journal reported Tuesday.