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Financials Roundup: Markets Take a Break from a 5-Week Rally

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Financials Roundup: Markets Take a Break from a 5-Week Rally PART 1 OF 6

How Did the US Financial Sector Perform Last Week?

Stock markets snapped a five-week winning streak

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.

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How did the financial sector perform last week?

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.

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