AIG (American Intl Group) is in the news today, off -11% or so as its auditors have called into question the value of some Credit Default Swaps (CDS's) listed on their Dec 31st balance sheet. The iShares Financial Sector ETF (IYF) is down -1.8% today, but still up +9% from its lows three weeks ago! One might ask: How is that possible? If there is blood in the streets, and another large financial firm is on the tape with more credit crunch news, why are financials up 9% from their lows? AIG is approx 4.6% of this particular ETF, by the way. Retailers and financials, some of the hardest hit sectors in the economy, are exhibiting short-term strength. We will continue to watch closely, as they could be signaling a change in market leadership.
Note: The biggest holding of IYF is none other than Bank of America (BAC), which will be added to the Dow Jones Industrial Average next week!
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