U.S. Banking Index More Bearish Than November

With pressure on banks increasing across the globe and hitting European banks (Royal Bank of Scotland (NYSE:RBS), Allied Irish Banks (NYSE:AIB), Barclays (NYSE:BCS) and Deutsche Bank (NYSE:DB)) particularly hard, the U.S. banking sector now finds itself falling faster than it did even at the November lows. State Street Corp. (NYSE:STT) has been considered one of the safest U.S. banks, yet announced today that profits in the most recent quarter fell 71%, largely as a result of a $6.3 billion loss in its investment portfolio during the quarter.

The chart below shows that the selloff in the banking index (^BKX) is sharper now than it was at any time during the November bank panic. While the banking index and most of the large banks are making new lows, the S&P 500 index (^GSPC) has managed to draw strength from other sectors to remain above the November lows and even above last week’s low.

The rest of the week should determine whether we have a higher low in the broader indices (my guess) or break below SPX 800 to challenge the November lows.

[source: BigCharts]

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