Citigroup’s Downgrade Sinks Markets

Financial exchange traded funds (ETFs) sank lower today after a downgrade of Citigroup (NYSE:C) sent the bank’s shares to a 10-year low.

Goldman Sachs [[gs]] said investors should sell the bank’s stock short, reports Neha Singh for Reuters. The last time its shares had traded so low was in October 1998, when Travelers Group and Citicorp merged to create Citigroup.

Goldman Sachs Analyst William Tanona said the United States’ largest bank may take $8.9 billion of writedowns from the April-June period, which would mean its third consecutive quarterly loss. He also said that Citigroup may either have to issue common stock or sell assets to raise capital.

Tanona also projected a $4.2 billion writedown in the second quarter for Merrill Lynch & Co. (NYSE:MER) and downgraded the U.S. brokerage sector to “neutral,” from “attractive.”

Naturally, financial ETFs are down sharply today:

• iShares Dow Jones U.S. Broker-Dealers (IAI): down 29.3% year-to-date
• Financial Select Sector SPDR (XLF): down 25.3% year-to-date; Citigroup is 6.4%
• Vanguard Financials (VFH): down 21.8% year-to-date; Citigroup is 4.6%
• Rydex S&P Equal Weight Financials (RYF): down 22.5% year-to-date; Citigroup is 1.2%

Read the disclaimer, as Tom Lydon is a board member of Rydex Funds.

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