Stocks plunge to their lowest levels since 2009
Last week, stocks in the financial sector plunged to their lowest levels since the recession on worries of a slowdown in economic growth around the globe.
Adoption of negative interest rate policies and loose monetary policies coupled with expectations of Europe’s easing of monetary policy have heightened fears of a slowdown in global economic growth.
Weakness in the financial sector is being witnessed across the globe. Fourth-quarter bank earnings have been dismal. A low margin outlook and falling commodity prices have led to further worries of credit losses for the sector. Lower long-term interest rates reduce the earnings power of banks.
The Financial Select Sector SPDR ETF (XLF), which serves as a barometer for US financial stocks, has plunged 12% in 2016 so far. In comparison, the iShares MSCI Europe Financials ETF (EUFN) has lost 10%, while the Wisdom Tree Japan Hedged Fund Financial ETF (DXJF) has plunged 23%.
XLF closed at $20.95 on February 5, losing 3.6% during the week. The Vanguard Financials ETF (VFH) and the iShares Financials ETF (IYF) generated returns of -2.9% and -3.5%, respectively, during the week. Comparatively, broad markets represented by the S&P 500 SPDR ETF (SPY) returned -2.9% during the same period.
Stocks such as Genworth Financial (GNW), Metlife (MET), and CBRE Group lost 21.6%, 13.1%, and 11.1%, respectively, last week. Meanwhile, the gainers for the week were Aon (AON), Allstate (ALL), and Cincinnati Financial (CINF). These stocks rose 5.7%, 4.6%, and 4.6%, respectively, during the week.