Homebuilders ETFs Don't Seem to Be Reaping Rewards of Rate Cuts

Homebuilders stocks and exchange traded funds (ETFs) are going to need more than the total of 3.25% interest rate cuts if they are going to be helped.

That's according to Nicholas Yulico for The Street. He says that one problem has to do with the 10-year Treasury note which has not fallen as much as the short-term Fed-rate.

Right now the 10-Year note is at 3.76%. Mortgage rates are tied to the 10-year Treasury note, so homeowners have not seen much lower rates. The average 30-year mortgage is at 6%, down from 6.38% back in September 2007.

SPDR S&P Homebuilders (XHB) has fallen 6.4% despite the three rate cuts, close to the S&P 500 at a 6.2% decline.

XHB and the iShares Dow Jones US Home Constuction (ITB) are down nearly 3% midday today. A number of homebuilder stocks are trading significantly lower, including Standard Pacific Corp (SPF), which is 5.1% of ITB. Hovnanian Enterprises Inc. (HOV) is also down, and it makes up 6% of XHB. Year-to-date, XHB is up 14.9%, while ITB is up 13.4%.

Ron Peltier, the CEO at Warren Buffett's Homeservices of America real estate company, said today that the housing market has steadied and is ready to bounce back.

He put much of the blame on lenders who handed out mortgages that didn't require documentation about assets or income, CNBC reports. He also noted that housing prices are still within 8% to 10% of their all-time highs and that as the market normalizes, stability will return.

Real Estate, Homebuilder ETFs Fall With Pending Home Sales Numbers

Homebuilding and real estate exchange traded funds (ETFs) reeled from the news that pending home sales hit a new low in March.

It was the second consecutive months in which a new low was hit, reports David Goldman for CNN Money. The reading was down 20.1% from March 2007, and 35% from the index's high in April 2005.

The Pending Home Sales Index is seen as a more forward-looking indicator of home sales than other real estate forecasts because they're measured a month or two before a sale actually closes.

For existing home sales, the numbers were slightly better: instead of the predicted 14.5% decline, the projections are now for a 14.4% decline. It's a case of taking the good news where you can get it. The actual figures will be released on May 23.

Among the related ETFs affected by the news:

• SPDR S&P Homebuilders (XHB): up 18.6% year-to-date
• iShares Dow Jones US Home Construction (ITB): up 18.9% year-to-date
• iShares FTSE NAREITH Real Estate 50 (FTY): up 9.7% year-to-date
• DJ Wilshire REIT (RWR): up 11.4% year-to-date

Disappointing Homebuilding Earnings Drags ETFs

The homebuilding industry announced disappointing first-quarter earnings, dragging down related exchange traded funds (ETFs).

The markets were feeling optimistic in the last few weeks because of positive earnings numbers from industries that don't count themselves as part of the financial or homebuilding sectors, reports Madlen Read for the Associated Press. But in the last two sessions, the confidence seems be slowly chipping away.

Homebuilder D.R. Horton reported a quarterly loss of $1.3 billion and cut its dividend in half, to 7.5 cents a share. The company is 4.4% of the SPDR S&P Homebuilders (XHB) and 5.7% of the iShares Dow Jones US Home Construction (ITB). Both are down midday, but so far have enjoyed a strong year: they're both up 17.6% year-to-date.

In the financial sector, it was disappointing earnings all around: Fannie Mae posted a quarterly loss of $2.2 billion; UBS reported a loss of almost $11 billion; and Wachovia said it's almost doubling its previously reported loss to $708 million.

Financial ETFs such as the iShares Dow Jones US Financial Services (IYG) and Regional Bank HOLDRs (RKH) were mostly flat on the news, however. IYG is down 5.5% year-to-date, while RKH is down 3.4% year-to-date.

Is Three Times Performance Going to Be a Charm for New ETFs?

A firm better known for its leveraged index mutual funds has filed for 36 exchange traded funds (ETFs) with the Securities and Exchange Commission (SEC) that raise the stakes.

The ETFs from Direxion Funds would deliver three times the performance (or three times the inverse) of their underlying indexes. This is a new twist, since no ETF currently offers anything more than double the exposure, leveraged or short.

The funds will cover a variety of asset classes that include sectors, international regions, real estate and even commodities, reports Heather Bell for Index Universe. The prospectus says the management fees for the funds will be 0.75%.

ProShares and Rydex have no doubt proved that some investors want leveraged and short ETFs, but is this going too far with the concept? For financial advisors and retail investors, double exposure might be plenty. We're concerned that this might be a case of too much octane.

Are ETFs going to be like those razors that hit the market with one more blade every time a new one comes out? Investors should be careful - too many blades, and you're likely to get cut.

Read the disclosure, as Tom Lydon is a board member of Rydex Funds.

Real Estate ETFs Fall After Two Left Hooks

Yesterday, they moved higher, but in midday trading so far today, real estate-related exchange traded funds (ETFs) are down what they gained and in some cases, more. Blame the one-two punch of bad housing news this morning.

First, it was reported that housing prices dropped in February at the fastest rate ever. It's being taken as an indication that not only is the housing crisis not letting up, but it's gathering steam, says the Associated Press.

The Standard & Poor's/Case-Shiller home price index of 20 cities fell by 12.7% vs. the same period last year. It was the fastest drop since the index's inception in 2001.

Then came the first quarter foreclosure numbers. According to Alex Veiga for the Associated Press, they jumped a whopping 112% from the first quarter in 2007. One in every 194 homes received a foreclosure filing in the quarter.

We seem to be stuck in a cycle: the market would pick up again if people would start buying properties, but without being able to secure loans, it can't happen.

Related ETFs were down so far today, including:

• PowerShares Dynamic Building & Construction (PKB), down 3.2% year-to-date
• iShares Dow Jones U.S. Home Construction Index Fund (ITB), up 20.8% year-to-date
• iShares FTSE NAREIT Real Estate 50 (FTY), up 10.1% year-to-date
• DJ Wilshire REIT (RWR), up 11.6% year-to-date

ETFs Shrug at Record Vacant Home Highs

Exchange traded funds (ETFs) seemed to sigh "Ho-hum" at the news that the percentage of vacant homes in the United States has reached a record high.

The Census Bureau says that 2.9% of U.S. homes (not including rental properties) were vacant in the first quarter, reports Alan Zibel for the Associated Press. In the fourth quarter of 2007, the percentage stood at 2.8%.

Real estate and homebuilder-related ETFs mostly shrugged off the numbers and held steady in midday trading. Some analysts are predicting quiet markets ahead of the Federal Reserve's meetings this week, during which a quarter-point rate cut is anticipated.

• SPDR S&P Homebuilders (XHB), up 18.1% year-to-date
• iShares Dow Jones US Home Construction (ITB), up 17.6% year-to-date
• iShares Dow Jones US Real Estate (IYR), up 7.7% year-to-date

Real Estate ETFs Spike Higher After Dismal Home Numbers

Homebuilding and real estate exchange traded funds (ETFs) were up by as much as 2.5% or more in midday trading, despite a dismal report saying that new home sales were perched at their lowest level in more than 16 years.

Sales in March dropped by 8.5%, and it's the slowest pace now since October 1991. The median price of a new home in March also fell 14.6%, the largest amount in almost 40 years, reports Martin Crutsinger for the Associated Press.

Other economic news was mixed:

• Factory orders for big ticket items fell for a third consecutive month in March, making for the longest streak of declines since 2001.
• Demand for durable goods fell by 0.3%, which was worse than expected.
• Consumer sentiment is at recessionary lows as the price of gasoline soars.
• On the upside, the Labor Department reported that jobless claims fell by 33,000 last week. Economists had been expecting a rise of 3,000.

So far in trading today, real estate and homebuilder ETFs seem to be shaking off the bad news:

• iShares Dow Jones US Real Estate (IYR), up 4.9% year-to-date
• SPDR S&P Homebuilders (XHB), up 13.4% year-to-date
• iShares Dow Jones US Home Construction (ITB), up 12% year-to-date

REIT ETFs Looking Up, But Not Out of the Woods Yet

Is it time to say "right on" for REIT exchange traded funds (ETFs) yet?

After a bumpy ride in 2007, the REIT ETFs are showing signs of life this spring, reports Billy Fisher for The Street.

REIT stands for real estate investment trust. It sells like a stock on major exchanges and invests in real estate directly through either mortgages or properties. This is a very liquid way to invest in real estate, and while they offer high yields, they are also known for special tax treatment, according to Investopedia. By investing in REITs, you are participating in a liquid, dividend-paying method in the real estate market.

Two REIT ETFs in particular are the Vanguard REIT Index (VNQ), up 7.6% year-to-date,and the Dow Jones Wilshire REIT (RWR), up 7.4% year-to-date. Analysts seem to agree that the funds may have "turned the corner," but that we are far from out of the woods yet.

The ETFs do offer dividend yields around 5%, and boast the highest dividend yields for ETFs available on the market. A pullback in new construction starts, lower interest rates and healthy occupancy rates in many markets are beneficial to these funds.

One risk of these funds is the varying outlooks for the different classes of REITs and even for the individual companies in those classes. For example, one company will benefit from the tight office space market in Manhattan, while another could be hurt by the growing empty office space in Orange County, CA.

Existing Home Sales Numbers Put Damper On Housing ETFs

The housing slump continued through March, and home-related exchange traded funds (ETFs) reflected this morning's latest numbers.

The National Association of Realtors said sales of existing single-family homes and condominiums fell by 2% in March. The median price of a home also fell 7.7% from the median one year ago, reports Martin Crutsinger for the Associated Press. It was the second-largest year-over-year price drop; the largest was February's 8.4% drop.

Sales increased by 2.9% in February, and it had raised hopes that the housing correction had reached the bottom. But analysts don't think a rebound will happen for months.

Homebuilder and real estate ETFs are down midday. So far this year, most of them are up, some into the double digits:

• SPDR S&P Homebuilders (XHB), up 17.1% year-to-date
• iShares Dow Jones US Home Construction (ITB), up 18.1% year-to-date
• iShares Dow Jones US Real Estate (IYR), up 4.2% year-to-date

Home Construction Falls Off, ETFs Shoot Up

Are investors finding bargain opportunities with home construction exchange traded funds (ETFs)?

The Commerce Department reported today that home construction dropped in March to a 17-year low, by 11.9%, reports Martin Crutsinger for the Associated Press. Building permits also fell last month.

With the, the iShares Dow Jones US Home Construction (ITB) and the SPDR S&P Homebuilders (XHB) shot up more than 4% midday. Both funds are up year-to-date, too: ITB is up 14.5%, while XHB is up 12.5%.

 

 

International Markets, ETFs Catching U.S. Housing Disease

The U.S. housing crisis is taking its toll on other countries, and it could hit their exchange traded funds (ETFs) if it persists for long.

Real estate prices are plummeting in the Irish countryside, the Spanish coast and even parts of Northern India, reports Mark Landler for the New York Times. Some property analysts abroad are expressing fear of a wholesale collapse. Western European once were buying investment properties in places such as Warsaw and Estonia - but no longer. In India, prices have dropped 20% in the last year.

The International Monetary Fund cut its global economic growth forecast last Wednesday, and said the downturn could carry through to 2009.

The SPDR DJ Wilshire International Real Estate (RWX) could feel the pinch if the crisis continues to spread. Year-to-date, the fund is down 7.8%. Some single-country funds may also experience some bruising:

• The New Ireland Fund (IRL), down 2.9% year-to-date
• WisdomTree India Earnings (EPI), down 13.6% since Feb. 26 inception
• PowerShares India (PIN), down 6.7% since March 5 inception
• iShares MSCI Spain (EWP), down 3.1% year-to-date

The troubles stateside aren't getting much better. J.W. Elphinstone for the Associated Press reports that home foreclosures jumped 57% in March. A rash of adjustable-rate loans are also scheduled to reset in May and June, as well, meaning yet more foreclosures are likely in the third and fourth quarters.

How will real estate ETFs react in the long run?:

• iShares Dow Jones US Real Estate (IYR), down 0.3% year-to-date
• iShares Cohen & Steers Realty Majors (ICF), up 2.8% year-to-date
• DJ Wilshire REIT (RWR), up 2.4% year-to-date

For full disclosure, some of Tom Lydon's clients own shares of EWP.

UltraShort Real Estate ETF Could Be Haven From Commercial Contraction

Inverse or leveraged exchange traded funds (ETFs) are on investors' radar these days and real estate is no exception.

UltraShort Real Estate ProShares (SRS) is an ETF that tracks twice (2x) the inverse of its underlying index, The Dow Jones Real Estate Index. That means, when the index heads south, PRS heads up twice that, and vice versa.

One of the top holdings of the index is the Simon Property Group (SPG), an Indiana-based retail mall developer. With lofty valuations at 52 times earnings, SPG is a Fortune 500 company, the success is extracted from volumes of cheap credit which fueled the past seven year expansion, reports Steven Chang on Seeking Alpha.

But, he says, commercial real estate could be ripe for a contraction because historically, it lags residential real estate by about a year.

The warning here is that such growth is unsustainable. Regular mall tenants such as The Gap or American Eagle are posting 10%-20% declines in revenue. This growth also fuels the REIT sector, which thrives on the possibility to make new deals upon other deals.

Pending Home Sales Hit Low; ETFs Aren't Out of the Woods Yet

Homebuilder and real estate exchange traded funds (ETFs) may have been showing strong performance over the last month, but that doesn't mean our housing problem is over.

In February, pending home sales hit a new low, reports Alan Zibel for the Associated Press. The National Associated of Realtors' index fell to 84.6, down from January's 86.2. Last February, the index was at 107.6. Economists had been expecting the index would move up slightly, to 86.3.

The index began in 2001 at a reading of 100. Its previous low was 85.8, notched last August. One economist predicts that home sales will fall by another 5% to 10% before making a turnaround at the end of the year.

Homebuilder ETFs are about 2.5% lower midday, while real estate ETFs are down slightly at less than 1%:

• iShares Dow Jones Real Estate (IYR), up 13.5% in the last month
• iShares Cohen & Steers Realty Majors (ICF), up 15.7% in the last month
• iShares Dow Jones US Home Construction (ITB), up 31.4% in the last month
• SPDR S&P Homebuilders (XHB), up 26% in the last month

For full disclosure, some of Tom Lydon's clients own shares of XHB.

Home Construction ETFs Appear to Be Making Amends for Last Year

It's down slightly today, but the home construction exchange traded fund (ETF) has been posting stellar gains so far this year.

Yesterday, the iShares U.S. Home Construction (ITB) came within touching distance of its 200-day moving average. Had it crossed over, it would have been the first time it has done so in 13 months. It still managed to surge to a six-month high, reports Tomi Kilgore for Forbes. Year-to-date, the fund is up 22.9%.

It's down slightly so far today, so topping the trend line might have to wait a bit.

The other home construction-related ETF, SPDR S&P Homebuilders (XHB), has been strong this year, too: it's up 22% year-to-date, and above its trend line.

For full disclosure, some of Tom Lydon's clients own shares of XHB.

New Quarter, New Start for Some ETFs

Financial, homebuilder and retail exchange traded funds (ETFs) were among the biggest winners on a day when the Dow Jones industrial average rose nearly 400 points.

Although Swiss bank UBS (UBS) and Deutsche Bank (DB) announced write-downs in the billions, UBS issued new shares to help lift their balance sheets. With that, investors seemed willing to make some bets that the worst of the damage from the credit crisis is behind them, says Joe Bel Bruno for the Associated Press.

Another boost of confidence came from the Institute for Supply Management, which said its March index of national manufacturing activity rose to 48.6. The number indicates a contraction, albeit a slower one than in February. Construction spending numbers also were better than expected.

The top unleveraged ETFs today were:

• First Trust Consumer Staples Alpha DEX Fund (FXG), up 13.2%
• PowerShares Dynamic Retail Portfolio (PMR), up 8.4%
• iShares Dow Jones U.S. Broker-Dealers (IAI), up 8.1%
• SPDR S&P Homebuilders (XHB), up 8%
• iShares Dow Jones U.S. Financial Services Index Fund (IYG), up 7.8%

For full disclosure, some of Tom Lydon's clients own shares of XHB.

Homebuilding ETFs Take a Jab, But Keep On Plugging

The Institute for Supply Management came out with February numbers that homebuilders exchange traded funds (ETFs) aren't going to enjoy.

Manufacturing contracted and construction spending fell again in February, and homebuilding fell for a record 24th straight month, reports Martin Crutsinger for Associated Press. Government building projects showed a slight gain in the month of February, but weakness is slumped throughout both homebuilding and non-residential activity. Overall, construction activity fell 0.3%.

Apparently the housing weakness will not turn around until the record glut of unsold homes is reduced, according to analysts' predictions. The high energy prices and the credit crisis are adding to the problem.

An economist as Wachovia Securities said that he expects housing weakness to continue through the first half of this year, but growth should resume in the second half when the government tax rebates are distributed to 130 million households.

In trading today, both SPDR S&P Homebuilders (XHB) and iShares Dow Jones US Home Construction (ITB) are up about 4%. The homebuilding sector, in fact, has staged something of a turnaround in the first quarter of this year. Year-to-date, the funds are up 12% and 13.4%, respectively. Perhaps investors are feeling that the end could be near?

For full disclosure, some of Tom Lydon's clients own shares of XHB.

New Home Sales Report Leaves Real Estate ETFs Glum

Real estate exchange traded funds (ETFs) took a hit today on the news that new home sales fell for the fourth consecutive month.

The Commerce Department says that sales were down 1.8%, the slowest pace in 13 years and a decline worse than what had been expected, reports Martin Crutsinger for the Associated Press.

The numbers come on the heels of yesterday's news that home prices fell by record levels in January.

The jury is still out on when this listing ship will begin to right itself, but many analysts believe the slump could last into 2009. Housing is being hurt by tighter lending conditions as banks continue to react to increasing mortgage defaults and hesitant prospective buyers, who are waiting to see if prices fall even further.

Real estate ETFs were lower by about 1.5% intraday on the glum news:

• iShares Dow Jones US Real Estate (IYR)
• iShares Cohen & Steers Realty Majors (ICF)
• DJ Wilshire REIT (RWR)

Financial and Real Estate Numbers Keep Markets, ETFs Busy

A flurry of activity and reports on Wall Street today sent exchange traded funds (ETFs) moving in every direction.

Financials took a hit on the news that Merrill Lynch & Co. Inc. (MER) had its earnings forecasts cut by JPMorgan Chase (JPM) and UBS AG, reports Kevin Plumberg for Reuters. Then Merrill turned around and downgraded Bank of America (BAC), PNC Financial (PNC) and SunTrust Banks (STI), saying that the collapse of the housing market will continue to hurt lending and home equity.

Financial ETFs are down slightly intraday:

• Regional Bank HOLDRs (RKH): JPMorgan Chase, 14.7%; Bank of America, 9.1%; PNC, 4.5%; SunTrust, 4.3%
• Financial Select Sector SPDR (XLF): Bank of America, 8.8%; JPMorgan Chase, 6.8%; Merrill Lynch, 2.1%; PNC, 1.1%; SunTrust, 1%
• iShares Dow Jones US Financial Services (IYG): Bank of America, 11.9%; JPMorgan Chase, 9.1%; Merrill Lynch, 2.7%; PNC, 1.4%; SunTrust, 1.4%.

The Conference Board reported this morning that its Consumer Confidence Index fell to 64.5 this month, from a revised 76.4 in February. The reading is a five-year low, and a far cry from the 73 that had been expected by analysts, reports Joe Bel Bruno for the Associated Press.

It's a strong sign that people are increasingly restricting their spending to the necessities amid fears that we're in a recession - but the decreased spending will only further weaken the economy.

Retail ETFs that could feel the effects of the news:

• SPDR S&P Retail (XRT)
• Retail HOLDRs (RTH)
• Consumer Discretionary SPDR (XLY)

Home prices also fell by record levels in January, by 10.7%, says Vinnee Tong for the Associated Press. It was the biggest decline in the Case-Shiller home price index's two-decade history. Spring is typically a strong sales time, though, and any notable improvements in the market might not be noticed until summer.

The worst-hit cities were Miami and Las Vegas, which were both hit by 19.3% drops. One economist says a pattern of improvement probably won't be seen until April, at the earliest.

This downbeat news comes on the heels of yesterday's positive news that existing home sales in the United States posted a surprise jump of 2%.

All these numbers have sent the price of oil gyrating as investors have begun selling on worries about the economy, while others are buying on news of the dollar's continued decline. Mercifully, the price of gas and diesel have pulled back some from their recent records, reports John Wilen for the Associated Press.

But analysts are saying that investors should continue to see choppy waters for oil as disagreement about the direction of the commodity persists. As the price see-saws, look for changes in these ETFs:

• United States Oil (USO)
• United States Natural Gas (UNG)
• iShares Dow Jones US Oil & Gas Exploration (IEO)
  

For full disclosure, some of Tom Lydon's clients own shares of RTH.

Homebuilders ETFs Stage a Turnaround

Two exchange traded funds (ETFs) in one of last year's weakest sectors, home construction, are beginning to show renewed vigor.

In the last two weeks, both SPDR S&P Homebuilders (XHB) and iShares Dow Jones US Home Construction (ITB) are up 19.7% and 16.6%, respectively. Last year, XHB was down 48.1%, while ITB lost 58.4%.

The funds got another boost this morning when a trade group reported that existing home sales in the United States rose unexpectedly in February, by 2%, reports Wanfeng Zhou for Thomson Financial.

This doesn't mean the sector is fixed, though - sentiment is still near historic lows this month, according to the National Association of Home Builders. We're still in the midst of the worst housing slump since the Depression, and it's keeping buyers and financing in short supply.

The rate cuts by the Federal Reserve are giving a lift to the sector, though. And the House Financial Services Committee Chairman Barney Frank has announced a proposal for legislation to allow the Federal Housing Administration to insure and guarantee refinanced mortgages that have been significantly written down by mortgage holders and lenders. If the program goes through, it would allow the FHA to provide up to $300 billion in new guarantees that would help refinance at-risk borrowers into viable mortgages.

If you're ready to do some bottom fishing, wait until XHB crosses its 200-day moving average and set an 8% stop loss.

Prices Up, Home Construction Down, But ETFs Don't Get the Memo

If you were just going by the performance of certain exchange traded funds (ETFs) in intraday trading, you wouldn't think some bad news about the housing and retail sectors had just come out.

First, wholesale prices rose again last month, by 0.3%. Outside of food and energy, prices rose at their fastest pace in 15 months with the rise in inflation at a "troubling" 0.5%.

The inflation numbers are a signal that the soaring energy costs are starting to affect other areas of the economy. Prescription drug prices rose by 1.3%, and cars and light trucks didn't get any cheaper, says Martin Crutsinger for the Associated Press.

Certain retail and consumer-spending ETFs were up between 2% and 3% in intraday trading. Perhaps the funds are reflecting the overall optimism in the market ahead of the Federal Reserve's rate cut late this morning.

• Retail HOLDRs (RTH), down 7.7% year-to-date
• SPDR S&P Retail (XRT), down 11.1% year-to-date
• Consumer Discretionary SPDR (XLY), down 9.4% year-to-date
• iShares Dow Jones US Consumer Goods (IYK), down 8.9% year-to-date

The news wasn't much better for the homebuilding sector: new home construction fell by 0.6% . Wall Street had predicted a 0.2% decline. Building permits, considered an indicator of future activity, fell by 7.8% to its slowest pace in 16 years.  The homebuilders ETFs were up nearly 9% intraday.

• iShares Dow Jones US Home Construction (ITB), down 2.9% year-to-date 
• SPDR S&P Homebuilders (XHB), up 0.2% year-to-date

Homebuilders Shares And ETFs Rally Off Fed's New Plan

Shares of homebuilders and related exchange traded funds (ETFs) rose on news of the government's new plan to stop the significant mortgage foreclosures.

iShares Dow Jones US Home Construction (ITB) jumped up 7% yesterday, while the SPDR S&P Homebuilders (XHB) ended the day 6.7% higher. In midday trading, both of these funds have lost yesterday's gains, feeling the pain that has spread all over today's market.

Wanfeng Zhou for Thomson Financial says Barney Frank, the House Financial Services Committee Chairman, proposed legislation that would allow the Federal Housing Administration to insure and guarantee refinanced mortgages that have been significantly written down by mortgage holders and lenders. The foreclosure peak has not yet been hit this cycle. A decline in foreclosures would also stabilize home prices in an already flooded market.

Today, President Bush will unveil his own proposal to overhaul lending, reports Marcy Gordon for the Associated Press. Prospective home buyers would get easier-to-understand information on the terms of their mortgages and save money on closing costs. The secretary of the Department of Housing and Urban Development (HUD) said many of the mortgage problems experienced today are a direct result of the complexity of the lending process.

Naturally, the mortgage broker industry is expected to oppose the plan. After a 60-day public comment period, the proposal could be in effect before summer.

Not All the Good Ideas Are Taken With ETFs

W.P. Thatcher for Stocks For All Seasons has 10 exchange traded funds (ETFs) in mind that he'd like to see come to market.

Long gone are the days of only the plain vanilla fund, so let's see what he has to add. Among his picks are:

• More commodity ETFs. Where are ETFs for pork bellies, cocoa and lumber? Most people aren't sophisticated enough to handle futures trading, but they still need exposure to this asset class. There is the Claymore/Clear Global Timber Index (CUT), but it doesn't track futures.

• Momentum stocks ETF. I don't know how this could be done cheaply due to the constant shifts in buying and selling, but there would be HUGE demand for it.

• An ETF for distressed debt. Let retail investors be vulture investors for a day.

• Real estate ETFs for specific housing markets.  People forget that we have many housing markets.  Not everywhere is tanking.

• A collectibles ETF. This would be very hard to value, so it might have to be in something really liquid like Bordeaux futures or Old Masters.

Late last year, we drew up our own wish list of ETFs. How are things coming along so far?

• State ETFs: Yep! The first state ETF is projected to be Oklahoma's, and it's scheduled to launch in late April. The fund will be made up entirely of stocks issued by the state's publicly traded companies.
• Ireland ETF: Wouldn't it be nice to have one in time for St. Patrick's Day? That would be something worth hoisting a Guinness for. Alas, there's always next year.
• Global Wireless ETF: Nothing doing yet, and there isn't anything in registration.
• Mortgage ETF: The market will turn around someday, but this kind of fund isn't a high priority right now.
• An ETF of ETFs: We've predicted that there will be one to launch this year, but so far, there hasn't been one. Luckily, there are nine months left.
• Dry Shipping ETF: A fund like this could capitalize on increasing globalization, but it has yet to materialize.

Which ETFs Are On First Today?

After a big day for the markets, you can't help but wonder which exchange traded funds (ETFs) stood out head and shoulders above the rest.

If you scroll through ETF Screen's breakdown of fund performance, you'll see that most ETFs ended higher in trading today.

Coming out way ahead are:

• ProShares Ultra Short Financials (UYG), up 14.4%
• ProShares Ultra Real Estate (URE), up 12.6%
• ProShares Ultra Basic Materials (UYM), up 11.6%
• iShares FTSE NAREIT Mortgage REITs Index Fund (REM), up 10.7%
• Claymore/AlphaShares China Real Estate (TAO), up 10.3%
• iPath MSCI India ETN (INP), up 10.2%
• iShares FTSE-Xinhua China 25 Fund (FXI), up 9.6%

The Ultras didn't do anything special to come out on top today, but instead, they benefited from the big jump financial ETFs experienced today. They illustrate the potential to do that much better when the market is faring well - and today, they did.

Stocks and ETFs Suffer as Indexes Hit 52-Week Lows

The traumatic credit market and increase in home foreclosures are touching down on all areas of the market, including exchange traded funds (ETFs).

Joe Bel Bruno for Associated Press reports that the Dow Jones Industrial dropped 214 points in trading today. The S&P 500 lost 2.20%, while the Nasdaq composite declined 2.30%. The declines sent both the Nasdaq and S&P to 52-week lows.

Credit concerns mounted after Thornburg Mortgage Inc. and Carlyle Group bond fund revealed troubles with investment backed mortgages. The entities failed to make margin calls, which are payments that guarantee much larger debt or investments.

Fourth quarter home foreclosures rose to record levels. Rising defaults have caused lenders to be weary to extend credit, resulting in abnormal credit markets.

Housing and Financial ETFs Take Their Lumps

Financial stocks and exchange traded funds (ETFs) declined after shares of Merrill Lynch & Co. Inc. (MER) fell to their lowest level in four-and-a-half years.

The drop came after the bank said it was getting out of the subprime lending business, reports Wanfeng Zhou for Thomson Financial. Down in midday trading were the Financial Select Sector SPDR (XLF), which holds 2.1% of Merrill Lynch, and the iShares Dow Jones US Financial Services (IYG), which holds 2.7%.

In a sign of ongoing trouble plaguing the housing sector, home foreclosures rose to a new high in the last quarter of 2007, says Jeannine Aversa for the Associated Press. The proportion of homes that went into foreclosure hit 0.83%, which passed the previous high of 0.78% reached in the third quarter. The hardest hit homeowners are those with subprime adjustable-rate mortgages.

The homebuilders sector took a left hook, too, as pending home sales data fell short of predictions. The National Association of Realtors was unchanged from December's level of 85.9. Economists had estimated it would be 86.2, reports Tomi Kilgore for Thomson Financial.

Both iShares U.S. Home Construction (ITB) and SPDR Homebuilders (XHB) fell on the news and are on track for their lowest close since Jan. 22.

Taiwan and ETF Are Going Through a Growth Spurt; Will It Keep It Up?

The iShares MSCI Taiwan Index (EWT) exchange traded fund (ETF) is up 3.8% year-to-date, leaving us wondering what is happening over there?

The greater Taipei region's real estate market beat the odds of a normally slow February, so says the latest realtor company statistics. The average price of a home rose to $9,860US per ping for February transactions, up 3% from the previous month, reports The China Post. A ping is a traditional Chinese unit of measurement, equivalent to 3.3 square meters.
 

Meanwhile, inflation is rising in Taiwan, too. Consumer prices rose 3.1% from a year earlier. This is the first time in four months that Taiwan has seen inflation, largely because of higher meat and vegetable prices. Chinmei Sung for Bloomberg reports that a resurgence of inflation related to the higher food costs may trigger the Central Bank to raise interest rates. The government said last month that consumer prices will rise 1.98% this year, faster than the previous estimate of 1.84%.

Taiwan's president Chen Shui-bian said the island has beefed up defense spending after its rival, China, said it wold do the same, reports Thomson Financial. For the first time in many years, military spending is going to account for 3% of Taiwan's GDP.

For full disclosure, some of Tom Lydon's clients own shares of EWT.

Mortgage Crisis Goes On, Dragging Home and Financial ETFs

Financial and real estate exchange traded funds (ETFs) headed south after Federal Reserve Chairman Ben Bernanke said the mortgage crisis was going to continue.

With that, he urged lenders to lower their loan amounts and help distressed homeowners. Even with the relief efforts already in place, he said, the problem will still exist for awhile longer, reports Jeannine Aversa for the Associated Press.

Bernanke's suggestion might not appeal to lenders, though, who are reluctant to write down principal.

What will it take to right this ship? As long as the market appears to be headed toward a recession, many financial and real estate ETFs will continue to feel the pinch, including:

• iShares Dow Jones US Financial Services (IYG)
• Regional Bank HOLDRs (RKH)
• iShares Dow Jones US Real Estate (IYR)
  

Construction, Manufacturing Numbers and ETFs Head Lower

Manufacturing and construction numbers came in, giving related exchange traded funds (ETFs) a punch to the gut in intraday trading.

U.S. manufacturing activity dropped in February to its lowest point in nearly five years, reports Madlen Read for the Associated Press. Modest growth was reported in January, but the Institute for Supply Management said the index was at 48.3. A reading below 50 indicates contraction. Even though they beat Wall Street's prediction of 48.1, the numbers aren't good.

Manufacturers are struggling with the rising cost of raw materials, as well as the slipping housing market.

Related to the dip in manufacturing were construction spending figures from the Commerce Department: they plunged in January by 1.7%, the biggest amount in 14 years. Not only were residential projects scaled back, but spending on hotels, motels, highways and other state and local government projects was curtailed.

Jeannine Aversa for the Associated Press says the numbers were worse than analysts were expecting.

Some construction and housing ETFs aren't reacting to the bad news too kindly so far today:

• PowerShares Dynamic Building & Construction (PKB)
• SPDR S&P Homebuilders (XHB)
• iShares Dow Jones US Home Construction (ITB)

Housing and Big Ticket Item Sales Drop, Taking ETFs With Them

More housing and consumer numbers came in today, affected real estate and retail exchange traded funds (ETFs).

The Commerce Department reported that new home sales fell in January by 2.8%. It's the slowest pace in 13 years. The median price of a home also dropped to $216,000, down 4.3% from December's median price, reports the Associated Press.

The slowing sales activity coupled with mortgage foreclosures is creating an inventory backlog, leading analysts to believe that the crisis is bound to get worse before it gets better.

In this time of belt-tightening and rising prices for oil and gas, a housing slump and credit squeeze, it's also not much of a surprise that consumers are holding off on purchasing big-ticket items. Orders dropped by 5.3% in January, the largest amount in five months, reports Martin Crutsinger for the Associated Press.

The numbers were worse than expected, and they cover a wide swath: commercial aircraft, autos, heavy machinery and computers.

Some ETFs that might feel the pinch as wallets are closed shut:

• iShares Dow Jones Transportation Average (IYT)
• SPDR S&P Retail (XRT)
• Consumer Discretionary SPDR (XLY)
• iShares Dow Jones US Real Estate (IYR)
  

Financial News Has Domino Effect on Markets and ETFs

Wall Street hardly waited for its coffee to kick in before a slew of news began sending stocks and exchange traded funds (ETFs) this way and that in a series of chain reactions.

• The dollar weakened to $1.50 against the euro, setting yet another record and crossing what's considered to be a psychologically important barrier. It's the weakest position since the 15-country currency was launched in 1999, reports Carter Dougherty for the New York Times.

• The news of our weakening currency drove the price of gold and oil to new highs, according to Pratima Desai for Reuters. The spot price of gold went as high as $964.70 an ounce, and oil surged above $102 a barrel. Its inflation-adjusted peak of $102.53, reached in 1980, is in the crosshairs.

• The government lifted caps on the investment portfolios for mortgage finance companies Fannie Mae (FNM) and Freddie Mac (FRE). The move is expected to increase liquidity in the mortgage industry. That's after Fannie Mae dished some bad news this morning: it had a $3.6 billion quarterly loss, which was worse than expected, Reuters reports. In midday trading, Fannie Mae's shares were up nearly 3%, boosted by the government's report. Earlier in the morning, its shares dipped to a 12-year low.

• With that, Federal Reserve Chairman Ben Bernanke indicated that the Fed is open to yet more rate cuts to continue its attempts to stimulate the economy, says Joe Bel Bruno for the Associated Press. It meets again on March 18, and a growing consensus believes that rates will be slashed by another half-point.

Some of the ETFs related to all this activity could be seeing some movement today:

• CurrencyShares Euro Trust (FXE)
• iShares Dow Jones US Real Estate (IYR)
• United States Oil (USO)
• streetTRACKS Gold Shares (GLD)
  

Housing and Consumer Reports Are Good News for Investors Who Love Bad News

Bad news about the economy continues to flow in from all corners, but it doesn't seem to be dragging certain exchange traded funds (ETFs) down with it at the moment.

The Consumer Confidence Index fell to 75 points in February, meaning that Americans are feeling nervous about business conditions and job prospects. It's the lowest reading since February 2003, when the index registered a 64.8, reports Eileen Alt Powell for the Associated Press.

The expectations index, which gauges outlook for the next six months, isn't doing much better. It dropped to 57.9, its lowest figure in 17 years.

In the housing sector, Standard & Poor's reported that home prices in the United States dropped 8.9% in the last quarter of 2007, says J.W. Elphinstone for the Associated Press. The S&P/Case-Schiller home price indexes show year-over-year drops in 17 metropolitan areas and double digit declines in eight of them. This follows bad news from yesterday that existing home sales were at a nine-year low.

Only three metro areas showed price increases: Charlotte, NC, Portland, OR and Seattle.

So far in trading this morning, real estate and retail ETFs don't seem to be taking much of a hit on the news. In fact, SPDR S&P Homebuilders (XHB) and iShares Dow Jones US Home Construction (ITB) were up more than 6% in midday trading. Retail-related ETFs were up slightly, as well, including the Retail HOLDRs (RTH) and SPDR S&P Retail (XRT).

Is this more bargain-hunting as investors suspect that the bottom is near?

If the Bottom Is In Sight, Is It Time to Snap Up ETF Bargains?

New existing home sales numbers are in, and home construction and real estate exchange traded funds (ETFs) went higher on investors' hopes that the slump is approaching the bottom.

Martin Crutsinger for the Associated Press reports that existing home sales dropped to a nine-year low, and the median price for a home dropped for the fifth consecutive month.

The National Associated of Realtors said that single-family home sales and condominiums dropped by 0.4%, to 4.89 million units. The media price for a home sold in January is $201,000, down 4.6% from a year ago. Sales dropped everywhere but in the Midwest, where they actually rose 3.4%.

How low can we go? That's what Wall Street was wondering after the report was issued, and the general mood was optimistic that a rebound could be coming later this year, says Joe Bel Bruno for the Associated Press.

But be careful: the market has been seeing some quick swings as investors sense a bottom and buy, then quickly cash out when it becomes apparent that it isn't the case. We suggest, as usual, waiting for a fund to move above its trend line before diving in.

Some ETFs that have inched higher today on the housing news are:

• iShares Dow Jones US Real Estate (IYR), down 2.9% year-to-date
• iShares Dow Jones US Home Construction (ITB), up 5.9% year-to-date
• SPDR S&P Homebuilders (XHB), up 6% year-to-date

Consumer, Housing Numbers Roll In, But Will ETFs Feel It?

Worries continue to plague both the retail and housing sectors and exchange traded funds (ETFs) as more numbers are released today that show signs of creeping inflation.

The Labor Department reported today that the consumer price index (CPI) rose 0.4% in January, say Brian Blackstone and Jeff Bater for the Wall Street Journal. The core CPI, which excludes food and energy prices, rose 0.3%. Both numbers exceeded Wall Street forecasts. Year-over-year, consumer prices rose 4.3%, the biggest increase since September 2005.

The government also said that housing starts showed a slight gain: 0.8%. That's after falling 14.8% in December. Single-family starts and permits dropped to 16-year lows - not a good sign.

It's believed that both numbers won't deter the Federal Reserve from lowering interest rates when it meets again next month.

All the not-so-hot numbers are straining investors' nerves, and retail- and housing-related ETFs could feel the pinch. But so far in trading today, most of them are up slightly. Will it stick?:

• Retail HOLDRs (RTH), down 3.2% year-to-date
• SPDR S&P Retail (XRT), down 3.5% year-to-date
• iShares Dow Jones US Consumer Goods (IYK), down 5.8% year-to-date

• SPDR S&P Homebuilders (XHB), up 2.3% year-to-date
• iShares Dow Jones US Home Construction (ITB), up 4.1% year-to-date
• iShares Dow Jones US Real Estate (IYR), down 5.1% year-to-date

Bernanke's Comments Weigh On Homebuilders And ETFs

Ben Bernanke's sentiment and comments toward the homebuilder sector is continuing to echo through related stocks and exchange traded funds (ETFs). Shares of homebuilders were trading even lower Friday for the second session as it is evident that troubles for this sector are going to continue for awhile.

iShares Dow Jones US Home Construction (ITB) was ended the session down a little more than 4%. The inventory of unsold homes and foreclosure have piled up to record highs. Mark Cotton for Thomson Financial reports that Ben Bernanke spoke before the Senate Banking Committee, saying that a virtual shutdown of the market for subprime mortgages and a reluctance to lend "jumbo" loans of $417,000 or more have irritated the problems in this market.

Denial May Make Real Estate And ETFs Miserable Longer

It appears De Nile is not just a river in Egypt, as homeowners will not accept that their home has lost value over the past year, evidenced by the state of the market and exchange traded funds (ETFs).

According to an online survey, three out of four homeowners believe their home hasn't lost value and 36% actually believe their home has increased in value. Chris Isidore for CNN Money says that what this reveals is that people either aren't paying attention to what's been happening in the housing market, or they are in denial about their home's value.

Zillow, the addictive website that surveyed this information, reports that there is an average decline of 5%, with many markets posting steeper declines. The National Association of Realtors show the median price of an existing home sold in 2007 fell 1.4% from 2006, and another 1.2% decline is expected for 2008, on the conservative side. A recent Los Angeles Times story reported that homeowners are no longer being allowed to tap into their equity.

So, what's with all the unfounded optimism? Turns out that it's not so much that homeowners are donning their rose-colored glasses, but that they're in a grieving process. Many are in denial and disbelief, and someday, they'll be on the road to acceptance.

But this denial may just prolong the housing slump longer and make it more difficult because home sellers will be slow to adjust their prices to the newer market reality.

Related ETFs that may benefit once the grieving process is complete:

• SPDR S&P Homebuilders (XHB)
• iShares dow Jones US Real Estate (IYR)
• iShares Dow Jones US Home Construction (ITB)

Bernanke Plays Role Of Heartbreaker for Markets and Some ETFs

It's Valentine's Day, but the economy and exchange traded funds (ETFs) aren't feeling much love from Federal Reserve Chairman Ben Bernanke.

Bernanke told Congress today that the cou