ETFs React to Libyan Unrest

February 22nd at 8:30am by Tom Lydon

Exchange traded funds (ETFs) fell Tuesday, with Wall Street returning to action on a day of unrest for global markets as violence increased in the major oil-producing state of Libya, with sentiment also influenced by the action in Europe and Asia.

  • Home prices in a majority of major U.S. cities tracked by a private trade group have fallen to their lowest levels since the housing bubble burst. The Standard & Poor’s/Case-Shiller index fell in December from November in all but one of the 20 cities it tracks. The 20-city index declined 1%. The damage from the real estate bubble now spreads well beyond Las Vegas, Phoenix and Miami, which built frantically during the mid-2000s. In many places, prices are expected to keep falling for at least the next six months. SPDR S&P Homebuilders (NYSEArca: XHB) is down nearly 2% on the reports.
  • An index of U.S. consumer confidence jumped to 70.4 in February, reaching the highest level in three years, with more optimism about the future, while views on current conditions remain weak, the Conference Board reported Tuesday. “Looking ahead, consumers are more positive about the economy and their income prospects, but feel somewhat mixed about employment conditions,” Lynn Franco, director of the Conference Board’s consumer research center, in a statement. Retail ETFs are unmoved by the news, and Direxion Daily Retail Bull 2x Shares (NYSEArca: RETL) is down more than 2.5% today.
  • Crude oil prices surged in early trading on Tuesday, as the specter of fresh violence hung over the Mideast and North Africa, as oil producers moved to curb output in Libya and as widespread protests threatened Col. Moammar Gadhafi’s grip on the nation. “Rising violence in Libya and Bahrain” is “providing support to oil prices, with geopolitics a key focus of the market,” wrote strategists at Barclays Capital in a note. Oil ETFs are flying today, lead by United States Oil (NYSEArca: USO), which is up 5%.
  • European stock markets dropped sharply Tuesday, extending the previous session’s heavy losses, as the violence in Libya escalated and crude-oil prices continued to rally. European markets had largely taken previous unrest in Egypt and Tunisia in their stride, but the scale of the violence in Libya and the country’s status as a top oil exporter mean the major indexes have been shaken hard by the latest turmoil. “Ongoing concerns about Libya continue to be the main driver for markets at the moment, with an ever-increasing oil price forcing investors to review their outlook for equities,” said Ben Critchley, sales trader at IG Index. The ProShares UltraShort MSCI Europe ETF (NYSEArca: EPV) rose about 3.5% in early trading.
  • Asian equities took a beating Tuesday as investors sold down stocks across the region on worries about raging political tensions in the Mideast and North Africa. Japanese stocks were hammered down as selling pressure mounted after Moody’s Investors Service lowered the nation’s ratings outlook, while New Zealand shares and currency slipped after an earthquake in the country’s second-largest city of Christchurch. The Vanguard Pacific ETF (NYSEArca: VPL) is down 2% 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.