ETFs Rally On Corporate Mergers And Stability In Japan

March 21st at 3:03pm by Tom Lydon

Exchange traded funds (ETFs) rallied Monday for a third straight day, finding support from corporate mergers and signs that Japan may be closer to stabilizing the nuclear crisis at its earthquake-hit plant.

  • Crude-oil futures gained Monday as conflict in Libya escalated, with international coalition forces conducting air strikes against the country while its embattled leader Col. Moammar Gadhafi vowed to wage a “long war.” A lower dollar, an upbeat tone for U.S. equities, and ongoing concerns about Japan’s nuclear crisis also contributed to gains, said Richard Ross, a technical analyst at Auerbach Grayson in New York. “You can look forward to an increase in volatility, but for the time being you got a good bid in the crude market,” he added. The Direxion Daily Energy Bull 3x Shares ETF (NYSEArca: ERX) ended 8.27% higher on Monday.
  • Sales of previously owned U.S. homes plunged in February and prices hit their lowest level in nearly nine years, indicating a housing market recovery was still a long way off. The National Association of Realtors said sales fell 9.6% month over month to an annual rate of 4.88 million units, snapping three straight months of gains. The percentage decline was the largest since July. The weak sales were the latest evidence of the malaise in the housing sector and confirmed it would remain outside the strengthening and broadening economic recovery. Economists had expected a decline of only 4% to a 5.15 million-unit pace. The actual drop was greater than even the most pessimistic forecast in a Reuters survey of 53 economists. Despite the news, the Direxion Daily Real Estate Bull 3x Shares ETF (NYSEArca: DRN) gained 3.49% today.
  • Gold futures closed higher on uncertainty surrounding the conflict in Libya, as well as the nuclear crisis in Japan.  Investors went to the precious metal as an investment refuge, lifting gold prices by more than $10 an ounce. “The current uncertainties are fertile ground for precious metals,” analysts at Commerzbank said in a note to clients Monday. Gold futures April delivery closed up $10.30, or 0.7%, at $1,426.40 an ounce after tapping a high of $1,435.10. Prices marked their highest closing level since March 9. The Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ) rose 3.58% today.
  • The Treasury Department said Monday that it will begin to sell its portfolio of $142 billion in agency-guaranteed mortgage-backed securities amassed during the financial crisis. “We’re continuing to wind down the emergency programs that was put in place in 2008 and 2009 to help restore market stability and the sales of these securities is consistent with that effort,” said Mary Miller, Treasury assistant secretary for financial markets. The sales could generate a profit for taxpayers of about $15 billion to $20 billion as market conditions have improved, the official said. The SPDR Barclays Capital Mortgage Backed Bond ETF (NYSEArca: MBG) ended slightly higher on Monday.

For full disclosure, Tom Lydon’s clients own GDXJ.

Gregory A. Clay contributed to this article

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