(Story to be updated.)
Bank-sector ETFs came under pressure Friday following news that
JPMorgan Chase was facing more than $2 billion in mark-to-market
losses in its synthetic credit portfolio this quarter, as reported
by several news outlets.
J.P Morgan itself lost more than 9 percent in Friday's session,
and funds like the $6.89 billion Financial Select Sector SPDR Fund
(NYSEArca:XLF) lost more than 1 percent today. JPMorgan Chase
represents some 9.2 percent of XLF's exposure, which consists
primarily of banks and financial services names.
JPMorgan Chase said late Thursday, after the market had closed,
that the losses incurred since March 31 were due to big trades gone
awry in its chief investment office. The complex web of trades is
said to be predicated on steadily improving economic data-a market
view that began to derail in recent weeks, according to the Wall
Street Journal. The Journal later reported that U.S. regulators are
investigating the trades.
The news triggered a wave of selling yesterday that pushed
JPMorgan Chase's stock price down by more than 6.5 percent in
after-hours trading, the Journal said. As noted, those losses
mounted to more than 9 percent in Friday's session.
Other ETFs, such as a pair of iShares funds, were caught in the
cross hairs of J.P. Morgan's problems on Friday:the $298.5 million
iShares Dow Jones U.S. Financial Services Index Fund
(NYSEArca:IYG), which allocates nearly 12 percent to JPMorgan
Chase, and the $520.5 million iShares Dow Jones U.S. Financial
Sector Index Fund (NYSEArca:IYF), which allocates nearly 7 percent
to the bank.
IYG's price fell almost 1.2 percent, while IYF dropped a bit
less than 1 percent.
Even the Vanguard bank-focused fund, the Vanguard Financials ETF
(NYSEArca:VFH), which has JPMorgan Chase as its biggest holding
could be impacted. It fell 0.79 percent, according to data posted
on Google Finance.
The $859.1 million fund had 7.2 percent allocated to J.P. Morgan
as of March 31, according to Vanguard's website.
Other banks such as Bank of America and Citigroup were also
feeling the pressure stemming from generalized concerns surrounding
the extent of JPMorgan's exposure. B of A's stock fell about 2
percent today, while Citi's fell by almost 4.25 percent.
These major banks are all top holdings in most bank-sector ETFs,
including the ones mentioned above.
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