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Stock ETFs Follow Citigroup, Banks Lower

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Stock exchange-traded funds lost ground Friday, as the Dow retreated 100 points and large-cap banks such as Citigroup (NYSE: C  ) and Bank of America (NYSE: BAC  ) dropped more than 2%.

Bank ETFs were the worst sector in Friday's stock pullback, with shares of Goldman Sachs (NYSE: GS  ) and Bank of America seeing so-called death crosses that could spell further weakness. Traders closely monitor moving averages to get a sense for where stocks and ETFs are trending. When the 50-day moving average drops below the 200-day average, traders call it a death or bear cross. (See "Financial ETFs Dive as Goldman, Bank of America See 'Death Cross'.")

Charles Schwab (Nasdaq: SCHW  ) has become one of the largest custodians of ETFs over the past year, with growth in this segment showing good momentum. Over the past year, ETF assets custodied at Schwab are up 32% to $121 billion. (See "Schwab Sees Growth in ETF Business.")

Since stocks and commodities seem to take their cues from the U.S. dollar, many traders are trying to determine whether the greenback's rally is simply a technical bounce or a sign that investors are shunning risk. PowerShares DB US Dollar Bullish (NYSE: UUP  ) was rising again Friday, as oil and U.S. stocks dropped. The ETF, which follows the dollar's movements against a basket of currencies, is on track for a gain of about 2% this week. (See "Is the Dollar ETF Rally for Real?")

Citigroup and JPMorgan Chase led shares of big banks to the downside. Financial Select Sector SPDR Fund (NYSE: XLF  ) ended down nearly 1.5%, while the main stock indexes were also down. Financial ETFs are also trailing the overall market in 2011, essentially trading where they started the year. (See "Financial ETFs Worst Sector on Citigroup, J.P. Morgan.")

A 4% plunge in Yahoo! (Nasdaq: YHOO  ) shares on Friday hurt ETFs that count the stock as a top holding, while investors continued to worry about the restructuring of a Chinese company in which Yahoo! has a stake. Earlier this week, Yahoo! in a filing said the ownership of Alibaba Group's online-payment business, Alipay, was restructured. Yahoo! has an ownership stake in Alibaba and is a large component in Internet HOLDRS and First Trust Dow Jones Internet. (See "Yahoo Decline Hits Internet ETF.")

Gregory A. Clay contributed to this article.

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The Fool owns shares of Yahoo!, JPMorgan Chase, and Bank of America and also holds a short position in Bank of America. Motley Fool newsletter services have recommended Yahoo! and Charles Schwab. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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9/27/2016 4:00 PM
BAC $15.29 Up +0.20 +1.33%
Bank of America CAPS Rating: ****
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GS $162.89 Up +1.41 +0.87%
Goldman Sachs CAPS Rating: ***
UUP $24.65 Up +0.02 +0.08%
PowerShares DB US… CAPS Rating: **
XLF $19.22 Up +0.15 +0.79%
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