Headlines From Citigroup and Goldman Sachs Put Pressure On Financial ETFs

Shares of the Financial Select Sector SPDR exchange-traded fund (NYSE: XLF) , which tracks the financial stocks of the Standard & Poor’s 500 Index, closed down 1.56%.  The announcement of the Treasury Department selling Citigroup (NYSE: C) shares and headlines of Goldman Sachs (NYSE: GS) executives set to appear before a Senate panel on Tuesday tugged financial ETFs to the downside. 

“The Treasury Department said Monday that it will begin selling 1.5 billion shares of Citigroup (NYSE: C) as part of a plan to divest its 27 percent ownership position in the bank,” Renae Merle Reports From Washington Post.

Morgan Stanley (NYSE: MS) is acting as the government’s advisor on the deal and arranging the sale. After it is completed, the government will be left with about 6.2 million Citigroup (NYSE: C) shares. “Treasury expects to provide Morgan Stanley (NYSE: MS) with authority to sell additional shares after this initial amount,” according to a government statement.

“Treasury officials have said that they plan to sell the stock in increments over several months. The offering is on track to be second-largest stock sale in history. At current stock prices, the sale of the initial 1.5 billion shares could generate more than $7 billion. All of the government’s shares are worth about $36 billion at current prices. Citigroup (NYSE: C) was trading at about $4.72 a share Monday afternoon,” Merle Reports.
 
The sale authorized Monday does not include the government’s preferred securities in Citi or common stock warrants, “but we think the sale reduces some of the stigma attached to the government investment,” Matthew Albrecht, a financials analyst for Standard & Poor’s Equity Research, said in a research note.

See The Full SEC Filing on the Citigroup (NYSE: C)  Share Sale: HERE

“Also down were shares of Goldman Sachs Group Inc. (NYSE: GS) , as controversy continued to swirl around the bank. A Senate subcommittee on Saturday released emails from executives and staff at Goldman, which showed them celebrating profit from the falling housing market. Democrats used the emails as an example of why financial reform is so important,” Sam Mamudi Reports From MarketWatch.

Mamudi goes on to say, “Goldman Sachs (NYSE: GS) executives are set to appear before a Senate panel Tuesday to answer questions tied to the bank’s conduct in the mortgage market. The push for financial reform may be nearing a conclusion, as on Monday Democrats reached a deal on derivatives regulation. The plan would force commercial banks to spin off their derivative trading operations,”

The Financial Select Sector SPDR exchange-traded fund (NYSE: XLF) has a 5.2%, and 4.51% stake respectively in Citigroup (NYSE: C) and Goldman Sachs (NYSE: GS).  Below you will find the top 10 holdings and a one year chart for the Financial Select Sector SPDR (NYSE: XLF):

Financial Select Sector SPDR Fund (XLF)

The Financial Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Financial Select Sector Index (ticker: IXM). Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.

Fund Top Holdings
As of04/23/2010
Name Weight Shares Held
Bank Of America Corporation (BAC) 10.06% 36,693,240
Jpmorgan Chase & Co (JPM) 9.72% 14,532,326
Wells Fargo & Co New (WFC) 9.44% 18,949,048
Berkshire Hathaway Inc Del (BRK.A) 7.11% 6,053,219
Citigroup Inc (C) 5.20% 71,868,430
Goldman Sachs Group Inc (GS) 4.51% 1,924,488
American Express Co (AXP) 3.13% 4,378,783
Us Bancorp Del (USB) 2.84% 6,998,047
Morgan Stanley (MS) 2.43% 5,112,458
Bank Of New York Mellon Cor (BK) 2.10% 4,421,248

Chart forFinancial Select Sector SPDR (XLF)

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