Financial exchange traded funds led the market lower Friday on speculation France and other European countries will finally be downgraded by Standard & Poor’s. An earnings miss by JP Morgan (NYSE: JPM) also fueled the selling.

Financial Select Sector SPDR (NYSEArca: XLF) fell about 2% in recent action. The sector ETF is encountering resistance at its 200-day simple moving average.

“Standard & Poor’s is set to downgrade the credit ratings of several euro zone countries later on Friday, but not those of Germany and the Netherlands, a senior euro zone government source said,” Reuters reported Friday morning.

Separately, JP Morgan shares slipped 4% after the banking giant said fourth-quarter profit declined 23%. [S&P’s ETF Picks for Regional Banks]

“As the first major bank to report for the fourth quarter, JP Morgan’s results offer a glimpse into what is largely expected to again be a bleak quarter for the nation’s largest financial institutions,” Dow Jones Newswires reported.

JP Morgan is the second-largest holding in the financial ETF at 8.4% of the portfolio. The fund lost 17% last year.

Financial Select Sector SPDR

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.