Financial stocks and sector-related exchange traded funds weakened Friday as second quarter earnings failed to meet expectations and palled in comparison to strong first quarter results.
The Financial Select Sector SPDR (NYSEArca:XLF), the largest financial sector-related ETF, declined 0.7% Friday.
Bank stocks have rallied in recent weeks but ran out of steam Friday after J.P. Morgan Chase (NYSE: JPM) was downgraded. While JPMorgan, Citigroup (NYSE: C) and Wells Fargo (NYSE: WFC) all beat analyst expectations for earnings, the financial sector still slipped on a lower trading revenue and weakness when compared to the first quarter
“The bar for earnings is higher this time around, especially after the phenomenal growth we saw in the first quarter. So companies that miss expectations or guide down will be overly punished,” Michael Scanlon, portfolio manager at Manulife Asset Management,” told Reuters.