While shoppers got a break last month in slightly lower prices, the markets and exchange traded funds (ETFs) were far less enthused about yet another sharp increase in claims for unemployment benefits.
First-time claims for jobless benefits shot up by 12,000 to the highest level in a month. The four-week average for unemployment claims did dip slightly, but continued weakness in the unemployment real has kept real economic recovery at bay. Economists are concerned with how long it’s taking to see these numbers fall below certain levels.
Overshadowed by the unemployment report was news that consumer prices fell for the second consecutive month, this time by 0.2%. The most notable drop was in gas prices, which fell 5.2% in May. Core consumer prices, which subtract energy and food prices, rose 0.1% in May after a flat April. In the last year, core prices are up 0.9%, which is below the Fed’s inflation target. [Consumer Discretionary ETFs: Outperformance in 2010?]
- United States Gasoline (NYSEArca: UGA)
Embattled and controversial BP (NYSE: BP) CEO Tony Hayward is in the hot seat this morning, personally delivering his mea culpas to Congress. Hayward says that he is “personally devastated” by the oil spill. BP’s stock is so far flat this morning and the ETF with the largest weighting in BP – SPDR S&P International Energy Sector (NYSEArca: IPW) – seems unfazed by the heated hearings, as well.
Pharmaceuticals are leading the way in the Dow’s decline this morning, particularly Pfizer (NYSE: PFE), which is being accused by the FDA of covering up eye problems associated with its popular Viagra drug. The company also made the decision to cease development of one of two drugs that would have been used to treat rheumatoid arthritis. [Biotech’s “Super Bowl” Could Spark a Biotech ETF Run.]
- iShares Dow Jones U.S. Pharmaceuticals (NYSEArca: IHE), Pfizer is 8%