Market Extra: Bank stocks, financial ETFs struggle as Morgan Stanley shares see biggest drop since 2020

by | Oct 18, 2023 | Stock Market

Exchange-traded funds that buy stocks in the financial sector struggled Wednesday, with Morgan Stanley’s steep drop landing it among the S&P 500’s worst performers. Shares of the Financial Select Sector SPDR Fund
which tracks financial companies in the S&P 500 index, closed 1.7% lower on Wednesday, according to FactSet data. Morgan Stanley’s stock finished the session with a 6.8% slide, after the bank reported a fall in third-quarter profit, although the results beat analysts’ expectations.

Financial stocks lagged the broader S&P 500 index on Wednesday, as other Wall Street banks such as Goldman Sachs Group Inc.
and Citigroup Inc.
also saw sharp declines. The S&P 500
finished Wednesday down 1.3%. The financial sector has posted losses so far this year, in contrast to the S&P 500’s gain of more than 12%. Bank-focused ETFs were hammered earlier this year after regional banks collapsed and investors worried that the rise in Treasury yields was creating cracks in the financial system. The SPDR S&P Regional Banking ETF
has plummeted around 30% in 2023, including a sharp 2.7% decline on Wednesday. The Invesco KBW Bank ETF
which tracks the broad banking industry, fell 2.6% on Wednesday in its worst day since Aug. 22, bringing the fund’s plunge this year to 24%, FactSet data show.

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