US stock markets (SPY) snapped a five-week winning streak on March 24. Fresh concerns of a supply glut and worries from the terrorist attack in Belgium spurred a fall in commodity prices. The fall was primarily driven by the industrial and financial sectors. It pushed the S&P 500 Index back into negative territory for the year. For the week, the S&P SPDR ETF lost 0.7%. Crude oil prices have been linked to stocks. The equities market tends to follow crude oil’s moves closely. The markets were closed on Good Friday.
Investors have been confused due to conflicting comments from the Fed on the interest rates’ future path. A string of comments from Fed officials last week suggested that better-than-expected economic data could lead to earlier rate hikes. Wall Street experts are assigning a 50% probability of a rate hike in June and two rounds of hikes in 2016. Lower long-term interest rates reduce the earnings power of banks and the Financial Select Sector SPDR ETF (XLF). XLF serves as a barometer for US financial stocks. So far, it fell 6.4% in 2016.
The Financial Select Sector SPDR ETF (XLF) invests primarily in banks. It fell 1.4% last week led by losses in Genworth Financial (GNW), General Growth Properties (GGP), and Moody’s Corp. (MCO). These stocks lost 9.5%, 4.7%, and 4.6%, respectively, during the five-day trailing basis ending on March 24. XLF closed at $22.31 on March 24—down 1.4% on a five-day trailing basis. Comparatively, other financial ETFs including the Vanguard Financials ETF (VFH) and the iShares Financials ETF (IYF) had returns of -1.2% and -1.3% during the same period.