With pressure on banks increasing across the globe and hitting European banks (RBS, AIB, BCS and DB) particularly hard, the U.S. banking sector now finds itself falling faster than it did even at the November lows. State Street Corp. (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 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.