The Financial Select Sector SPDR Fund (XLF) has broken below a key technical support level after falling nearly 9% since early September. Mott Capital Management founder Michael Kramer says the breakdown, combined with a renewed steepening of the Treasury yield curve, points to further losses for bank stocks.
The Financial Select Sector SPDR Fund has fallen nearly 9% since peaking on Sept. 3. The ETF is now breaking below a support level at $53.50, and Mott Capital Management founder Michael Kramer says the breakdown could open the door to an additional 5% decline.
Yield curve turns from flattening to steepening
At first, a flattening yield curve appeared to explain the weakness in financial stocks. Kramer notes the curve has since started to steepen again, as the 2-year Treasury yield stabilizes near 4.798% while the 10-year and 30-year yields climb to 5.244% and 5.610%.
A pattern that has punished banks before
Kramer points to two earlier stretches when financials sold off as the curve moved. In the summer of 2023, the 10-year yield rose faster than the 2-year and XLF performed poorly. In early 2025, the 2-year yield fell faster than the 10-year, and the fund struggled again.
He says the current move resembles the 2023 pattern, when higher nominal and real yields may have pushed up mortgage rates and other borrowing costs.
Oversold, but the support break stands
Kramer's charts show XLF could extend its decline toward $50.75, which would fill a price gap left open since June 4. The fund is also oversold, with its relative strength index falling to 22 — well below the 30 threshold that marks oversold territory — while its price sits at the lower Bollinger band. Kramer says those conditions could bring a period of consolidation, or even a retest of resistance at $53.50.
Kramer warns that the longer elevated rates persist, the more damage the financial sector is likely to incur, especially as nervousness likely builds ahead of earnings season.
Source: MarketWatch.com
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