The financial sector is a key component of economic growth and
recent signs of weakness in major banking stocks have investors
The SPDR S&P Bank ETF (NYSE:
) tracks 55 of the nation's largest banks with top holdings
including Wells Fargo (NYSE:
) and Bank Of New York Mellon (NYSE:
This ETF currently has $2.6 billion in total assets and
charges an expense ratio of 0.35 percent.
Recent scrutiny over capital requirements combined with
heightened sensitivity to losses on mortgage settlements has sent
this sector reeling in the last two months.
Since hitting a high in March, KBE has now lost 11 percent and
broken below its 200-day moving average.
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KBE is now in striking distance of its January low and a break
below that level could signal additional selling is on the
Only time will tell if this key support area will hold.
Bank of America Corp (NYSE:
) is one of the representative holdings in KBE and has been a
leader on the downside this year despite having recently
announced a plan to increase its dividend and buy back
Clearly that hasn't been enough to satisfy investors that the
bank is on solid footing with regards to profitability.
This weakness has also filtered down from the nation's top
banks to the regional level as well. The SPDR S&P
Regional Banking ETF (NYSE:
) tracks 81 individual stocks of smaller banking
Prior to this sell off, KRE has actually been outperforming
KBE by a modest margin over the last year. However, that
gap has closed considerably as the weakness has progressed in
The nervousness in banking stocks may also be enhanced by
falling interest rates, which has propped up bond prices and
signaled that investors are looking to safe haven assets during
this uncertain period.
Ultimately the banking sector is going to need to prove that
it can hold these near-term levels or risk slipping into the
© 2014 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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