ETFs React to Falling Unemployment

January 7th at 8:30am by Tom Lydon

Exchange traded funds (ETFs) are trying to gain traction on Friday after the government said the economy added fewer jobs than expected in December and the unemployment rate fell to 9.4%.

  • The nation’s economy added 103,000 jobs in December and the unemployment rate dropped to 9.4% last month, its lowest level in 19 months. But the job growth fell short of expectations based on a strengthening economy. And the drop in unemployment was mainly because people stopped looking for work, the Labor Department said Friday.
  • Federal Reserve Chairman Ben Bernanke was slightly more optimistic about the economic outlook in his first appearance before the new Congress on Friday but gave no hint that he is ready to back off of the controversial $600 billion bond-buying program. “We have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold,” Bernanke told the Senate Budget Committee. The pace of growth “seems likely to be moderately stronger in 2011 than it was in 2010,” he said. Oil-focused ETFs are moving as they tend to do on the optimism; Oil Service HOLDRS (NYSEArca: OIH) is up nearly 3% so far this morning.
  • European stocks are mixed Friday, led by Spain and Portugal, as investors digested the U.S. data. Peripheral markets posted the biggest declines, as the cost of insuring eurozone debt rose amid concerns about upcoming bond issuance by Portugal. ProShares UltraShort MSCI Europe (NYSEArca: EPV) is up more than 2.5% so far today.
  • Major Asian markets delivered another mixed performance Friday, with Japanese shares ending higher as a weakened yen spurred auto stocks, while in Hong Kong stocks snapped a seven-session winning streak as investors sold local property developers. The Global X China Financials ETF (NYSEArca: CHIX) rose 1% today.

Gregory A. Clay contributed to this article.

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.

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