The State Street Financial Select Sector SPDR ETF XLF surged 5.23% in October, outperforming the S&P 500's 1.40% decline as investors digested third-quarter earnings. Analyst Ian Bezek attributed much of the sector's strength to a shift away from artificial intelligence (AI)-related stocks, which prompted capital to flow into financials.
Cboe Global Markets CBOE led the gains with a 21.05% rise, followed by S&P Global SPGI at 20.20% and Arthur J. Gallagher AJG at 19.09%. Bezek noted that Cboe could benefit from increased options trading tied to the Cboe Volatility Index VIX, while insurance brokers and financial data providers rebounded as AI-related sentiment reversed.
On the downside, Coinbase Global COIN plunged 24.17%, with Robinhood Markets HOOD falling 23.54%. Bezek cited weakening risk appetite in AI and cryptocurrency markets, along with reported cyberattacks on crypto exchanges, as key factors behind the declines.
Despite October's gains, Bezek remained cautious about financial stocks heading into year-end, pointing to weak consumer sentiment, soft housing demand, and high energy prices as challenges. He also warned of a potential inverse wealth effect if financial markets continue to decline.