Economic Uncertainty Hold Back ETFs

December 22nd at 8:30am by Tom Lydon

ETFs are flat on Wednesday, reacting to data showing the U.S. economy expanded at a 2.6% annual rate in the third quarter, an upward revision that still came in below market expectations.

  • Crude-oil futures moved back above the $90 level Wednesday, flirting with highs last seen in 2008, on a string of bullish indicators for the energy sector. In recent trading, oil rose 36 cents to $90.18 a barrel, up 0.4%. Crude futures haven’t broken through the $90 level since early December. Separately, the American Petroleum Institute said late Tuesday that crude inventories fell by a sizable 5.8 million barrels on the week, with gasoline supplies dropping by 2.9 million barrels. Analyst Brian Niemiec of Susquehanna Financial Group said”The market is taking it as a positive sign that supplies are being reduced across the energy complex,” The ProShares Ultra DJ-UBS Crude Oil ETF (NYSEArca: UCO) is moving up in response to the bullish energy trend.
  • On the corporate front, shares of drugstore chain Walgreen Co. (NYSE: WAG) are up big today (approx. 8%) after reporting first-quarter earnings of 62 cents a share, well ahead of consensus estimates calling for a profit of 54 cents. Investors can consider the Health Care Select Sector SPDR ETF (NYSEArca: XLV) [Why 2011 Could Be Health Care's Year.]
  • Shares of Nike Inc. (NYSE: NKE) have slipped  approx. 6% today after the apparel and footwear giant warned late Tuesday that the industry will experience margin pressure due to rising input costs, overshadowing firm a 22% jump in the company’s second-quarter profit. “As supply and demand find a new normal in the recovering economy, our industry is going to experience margin pressure due to rising input costs,” CEO Mark Parker warned.
  • European stocks’ three-session win streak was in doubt on Wednesday afternoon, as banks weighed on the downside and investors mulled the latest U.S. report on economic growth. Late Tuesday, Fitch Ratings Service warned it could downgrade Greek debt to junk status. The review is expected to be completed in January, with Fitch due to look at the country’s fiscal sustainability, economic outlook and reform efforts by the government. Bullish investors can play the long trend with the ProShare Ultra MSCI Europe ETF (NYSEArca: UPV) [Why Overseas ETF Investors Are Coming Here.]
  • Asian markets struggled for direction in subdued trading Wednesday, with Japanese shares drifting lower on profit taking ahead of a holiday, and after a report of weaker-than-expected exports data. Shanghai stocks fell as banks were hit by lingering worries about further tightening measures from Beijing, while the Hong Kong market was supported by shares of refiners after the government allowed them to raise fuel prices. “This might be time for positioning for profit in the New Year. Watch, however, for a little more choppiness in the markets before a clear short-term trend is established,” said SIAS Research technical analyst Edmund Seow in Singapore. The Direxion Daily China Bull 3X Shares ETF (NYSEArca: CZM) is moving up in early trading.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.