Banks and sector-related exchange trade funds bucked the bearish momentum Friday after the Federal Reserve revealed all 31 big banks subjected to a stress have passed the first round.
On Friday, the iShares U.S. Regional Banks ETF (NYSEArca: IAT) led the charge, advancing 1.1%. Additionally, the SPDR S&P Bank ETF (NYSEArca: KBE) rose 0.7%, SPDR S&P Regional Banking ETF (NYSEArca: KRE) gained 0.8% and PowerShares KBW Bank Portfolio (NYSEArca: KBWB) added 0.4%.
In contrast, the broader financial sector ETF, Financial Select Sector SPDR (NYSEArca: XLF), dipped 0.6% Friday while the SPDR S&P 500 ETF (NYSEArca: SPY) declined 1.3%.
The Fed revealed that all 31 big banks had sufficient capital to absorb losses during a potential economic downturn, marking the first time the central bank found no firms below the main capital thresholds, Bloomberg reports.
While the bank ETFs do not hold every firm that the Fed scrutinized, the banks tested made up 38.4% of IAT, with a heavy 12.2% tilt toward PNC Financial Services Group (NYSE: PNC). KBE included a smaller 22.5% total weight in the banks tested, but the ETF equally weights holdings. KRE also equally weights holdings but included a 12.5% exposure to banks tested as it only tracks more smaller companies. Lastly, KBWB includes a hefty 76% exposure to the tested banks.
The largest U.S.-based banks “continue to build their capital levels and to strengthen their ability to lend to households and businesses during a period marked by severe recession and financial market volatility,” the Fed said.