Exchange traded funds tracking the financial sector were in the limelight Wednesday after Standard & Poor’s downgraded its ratings on a half-dozen major U.S. banks. Meanwhile, key component Bank of America (NYSE: BAC) was in danger of seeing its shares fall below $5, which could trigger additional selling from institutional investors.

S&P downgraded Bank of America, Citigroup (NYSE: C), Goldman Sachs (NYSE: GS), JP Morgan (NYSE: JPM), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: GS) and several other of the world’s largest banks.

Financial Select Sector SPDR (NYSEArca: XLF) was set for a higher open Wednesday as markets got a boost after China cut the reserve requirement ratio for its banks. [China Bank Reserve Cut Stokes Equity ETFs]

The financial sector ETF has lagged the market this year, losing 23.6% versus a 3.1% decline for the S&P 500, according to Morningstar. [Financial ETF Rally Questioned as Citigroup Leads Banks]

Some analysts say the banking sector needs to stabilize before the broader market can enjoy a sustainable rally. [Banks Drag Stock ETFs Lower]

Bank of America shares are struggling to hold the key $5 level. Some institutional investors are prohibited from owning stocks under $5 a share.

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