ETFs Shrug Off Possible Spain Downgrade

December 15th at 8:30am by Tom Lydon

Exchange traded funds (ETFs) are up moderately Wednesday after a rise in consumer prices and a pickup in New York’s regional manufacturing activity offset credit concern in Spain.

  • The major stock indexes are flat after the consumer price index, excluding volatile food and energy costs, edged up for the first time since July. The government data reinforced the Federal Reserve’s stance “that inflation is not yet a concern, while deflation and disinflation are more pressing,” said Dan Greenhaus, chief market strategist at Miller Tabak & Co. PowerShares DB U.S. Dollar Bullish (NYSEArca: UUP) is up slightly this morning following the report.
  • Spain led a broad decline for European markets Wednesday after Moody’s warned it may downgrade the country’s credit rating. Heino Ruland, strategist at Ruland Research, said the warning has sparked profit-taking across Europe after the recent winning streak. He added, however, that the rating agency is just responding to worries that the market has already reacted to. iShares S&P/Citigroup International Treasury Fund (NYSEArca: IGOV) is down 0.5% today; Spain’s debt is 4.7% of the fund.
  • Most Asian stock are lower Wednesday, with Hong Kong shares suffering big losses after Spain warnings. Japanese shares struggled for direction after the Bank of Japan’s tankan survey showed sentiment deteriorated in the country’s manufacturing sector. ProShares UltraShort MSCI Japan (NYSEArca: EWV) is up slightly this morning.
  • U.S. factory output grew for the fifth consecutive month, says the Associated Press. Industrial production overall has increased 9.8% since the low in July 2009. It’s all relative, though: output is still down 6.9% from the September 2007 peak. PowerShares Dynamic Industrials (NYSEArca: PRN) is up 1% so far today on the heels of the news.

Gregory A. Clay contributed to this article.

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