The market’s worst-performing sector could feel more pain

Financials have tumbled to become the worst-performing sector on the S&P 500 year to date, and the pain isn't going away, according to some traders.

The financial sector is the only sector besides health care sitting in the negatives, and a 1.3 percent drop on Friday has Fort Pitt Capital portfolio manager Kim Forrest believing further declines could follow.

According to Forrest, low interest rates have given banks the time to recover, but it hasn't allowed them to make money.

"For financials in the U.S., we're really cognizant that most of the banks make money off of lending long and borrowing short, and it is not looking good," she said Friday on CNBC's "Power Lunch.""It's a tough time for banks and it looks like it's getting tougher."

For that reason, Forrest would prefer to invest in "banks that get most of their revenue from fees" rather from interest-rate-sensitive businesses.

Chantico Global founder Gina Sanchez doesn't see rates rising anytime soon.

"Foreign banks are basically looking around the world to where they can meet their liquidity requirements because Basel III essentially allows them to meet that liquidity requirement," she said. "That's adding an additional demand for U.S. Treasurys and it's going to keep the long end lower than it might otherwise be even in a slow recovery."

As of Monday morning, the financial sector is down 3.2 percent on the year, even as the S&P as a whole is up 2.5 percent.


Videos

Trades to Watch

Trader Bios

About

Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

Read more

Connect