3 Financial ETFs Exploding Higher On Stress Test News

The results of financial stress tests of the nation’s largest banks were recently released and surprised expectations by besting capital requirements. The majority of the financial and banking institutions were then allowed to announce dividend increases and share buyback plans that led to a strong jump higher in this sector.

The following ETFs were some of the strongest performers after the announcements were made:

SPDR KBW Bank (ETF) KBE

Banking stocks responded with strength on Thursday and KBE was one of the sturdiest of the group. This exchange-traded fund tracks 64 companies engaged in traditional banking and lending services through an equal-weighted structure.

KBE has approached its highest levels of the last 12-months after months of rocky price action that has seen this index swing back and forth. The news of companies such as Citigroup Inc C and Wells Fargo & Co WFC increasing their returns to shareholders may be just what this ETF needs to break out of its sideways trend.

Related Link: Bullish Catalysts For Regional Bank ETFs

iShares Dow Jones US Reg Banks Ind.(ETF) IAT

Small- and mid-sized banks also joined in on the sector strength on Thursday, as IAT rose back near its 2015 highs. This ETF tracks 53 regional financial institutions, which include companies such as U.S. Bancorp USB and PNC Financial Services Group PNC.

IAT can be used to target a specific niche of the banking sector that eschews exposure to larger financial institutions. This fund has over $560 million in total assets and charges an expense ratio of 0.43 percent.

Direxion Daily Financial Bull 3X Shares FAS

Aggressive investors love to use leverage, and FAS is one of the most popular leveraged ETFs in this sector. This fund has over $1.3 billion in total assets and is the fifth-largest ETF by assets in the financial arena.

FAS is designed to track three times the daily price movement of the Russell 1000 Financial Services Index. This includes over 230 banking, capital markets, REIT and insurance companies.

FAS is an option to magnify returns in financial stocks over a short period of time, but investors should be wary about the high risk and suitability of leverage before considering this vehicle.