SDPR S&P 500 (NYSEArca: SPY). SPY is one of the go-to ETFs for exposure to the broader market. No wonder: the S&P 500 is the index that is most watched by professional traders because the large-cap index is considered one of the broadest measures of the state of the U.S. economy. [Indexes ETF Investors Should Know.]

Financial Select Sector SPDR (NYSEArca: XLF). XLF holds some of the biggest banks in the country, but they’re under fire these days. Senate Banking Committee Chairman Christopher Dodd is expected to unveil legislation that will be even tougher on the financial industry than President Barack Obama’s original plan. Dodd’s bill will allow the Federal Reserve to examine any bank holding company with assets in excess of $50 billion. Large financial companies that aren’t banks could also fall under scrutiny under the plan. [6 ETFs to Play the Financial Recovery.]

PowerShares QQQ (NASDAQ: QQQQ). Technology is leading the way out of the recession. Dr. Ed Yardeni of Yardeni Research says that tech will come out ahead this year and “industry analysts are raising both their 2010 and 2011 estimates as the sector continues to deliver more positive earnings surprises than the other sectors.” The tech sector’s top performers have some things in common, such as companies that have big global footprints and strong, clean balance sheets. Additionally, valuations look attractive, tech companies are continuing to put up record revenue numbers and capital expenditure may begin to increase. [Why Tech ETFs May Keep Leading in 2010.]

iShares MSCI Emerging Markets (NYSEArca: EEM). The man who coined the term “emerging markets,” Antoine van Agtmael, chief investment officer at Emerging Markets Management, says emerging market shares could waver in a 20% up or down range this year. It won’t be the sell-off of 2008, but it may not be the bonanza seen in 2009. Emerging markets still have value and although the returns may not be what they had been, you can’t fight the trend. [Emerging Market ETFs: A Temporary Pause?]

iShares Russell 2000 Index Fund (NYSEArca: IWM). On average, small-caps outperform their large-cap brethren for a full three years coming out of a recession, according to Morningstar. Coming off particularly nasty slowdowns, small-caps boast even more endurance. For example, after the 1973-1974 recession, small-caps trounced large-caps for an entire decade, returning an average of 28% per year. Furthermore, the small size of these shares make them nimble and better equipped to withstand an economy’s ups and downs. Small-caps have a historical tendency to outperform because they’re better able to adapt to shifting market conditions. [The Case for Small-Cap ETFs.]

United States Natural Gas (NYSEArca: UNG). President Barack Obama is unveiling a proposal for coal-burning power plants to switch to natural gas. That’s because natural gas is cleaner, and the United States has got it in spades. Big oil might like the proposal, too, as many companies have made significant investments into natural gas. [Obama's Proposal Could Be a Win for Natural Gas ETFs.]

iShares Dow Jones U.S. Real Estate (NYSEArca: IYR). At the very least, real estate’s comeback from the lows is impressive. Investors had priced in total financial ruin that never materialized; that’s the good thing. But now the market may have gone too far in the other direction; there are concerns that it has “overshot” and calls for a strong recovery are way too hopeful at this point. Worse yet, if a double-dip recession strikes, real estate stocks could be among the hardest-hit. [Real Estate ETFs: Big Improvements, Big Challenges.]

iShares MSCI Japan (NYSEArca: EWJ). Joblessness in Japan is dropping and jobs availability is o the rise. It’s taken as a sign that improving exports and output are fueling the necessary economic growth. But don’t get too excited; analysts still feel that, as in most developed markets, a recovery in Japan will be slow. [3 Things Japan ETF Needs Now.]

iShares FTSE/Xinhua China 25 (NYSEArca: FXI). The Chinese government also has a vested interest in building and maintaining the country’s infrastructure: when there are roads, runways, electric power, clean water and more, social unrest declines. Meanwhile, the country still struggles with concerns over an asset bubble and is taking steps to mitigate these issues. China’s government warned that China’s asset prices could fluctuate dramatically if global stimulus policies are reduced. [China ETF Plays.]

Energy Select Sector SPDR (NYSEArca: XLE). Energy is a major component of daily life around the world. If futures-based energy ETFs aren’t for you, perhaps an equities ETF such as this one might be a better bet. Wild price swings in oil, natural gas and gasoline may take awhile to become evident in these funds, making them slightly less volatile. The oil industry is expanding its options into other energy fields as it anticipates the eventual depletion of oil reserves. [How to Harness Energy by Using ETFs.]

For full disclosure, Tom Lydon’s clients own shares of UNG and QQQQ.

Max Chen contributed to this article.

Greece may have scared up an additional $6.5 billion in deficit cuts, which may be announced tomorrow. The European Union amped on the pressure on the economy in order to head off a eurozone-wide contagion effect. The new measures reportedly will include higher tobacco, alcohol and sales taxes and deeper cuts in public workers’ bonus payments.

U.S. auto sales are making a comeback, although GM’s gains didn’t exactly thrill analysts, who were expecting more. Ford (NYSE: F) was the big winner, seeing a 43% sales surge last month. It was the first time since 1998 that Ford’s deliveries bested GM’s, which rose 12%. SPDR S&P International Consumer Discretionary Sector (NYSEArca: IPD), which holds a number of automakers, is up 0.6% so far today. [Play Auto's Rebound With This ETF.]

Joblessness in Japan dipped below 5% today and the availability of jobs has risen. It’s taken as a sign that improving exports and output are fueling the necessary economic growth. But don’t get too excited; analysts still feel that a recovery will be slow. iShares MSCI Japan (NYSEArca: EWJ) is up about 0.6% so far today. [3 Things Japan ETF Needs Now.]

Australia hiked interest rates again for the fourth time since October as the economic recovery in the nation deepens. The Reserve Bank of Australia raised its key cash rate by a quarter of a percentage point to 4%, rounding out the total rate rise to 1%. iShares MSCI Australia (NYSEArca: EWA) is up nearly 1% this morning. [Australia ETF: Steady Growth.]

For more stories about Australia, visit our Australia category.

In other housing-related news, Home Depot (NYSE: HD) announced estimate-beating earnings this morning as more homeowners sought materials for home improvement projects. Lowe’s (NYSE: LOW) announced its own earnings yesterday, also trouncing the estimates. The retailers noted that customers seemed more willing to spend on big ticket items, such as flooring and kitchen remodeling projects. iShares Dow Jones U.S. Homebuilders (NYSEArca: ITB) is down slightly in early trading; Home Depot is 4% and Lowe’s is 3.8%. [3 Signs of Improvement in Homebuilders.]

Consumer confidence fell this month to the lowest level since April 2009 as concerns about the pace of the recovery and lingering weakness in the jobs market weighed on minds around the country. In an effort to remedy the increasingly pressing unemployment situation, President Barack Obama is working to push a $15 billion jobs creation bill through Congress; it passed through the Senate last night.

Toyota’s (NYSE: TM) U.S. president has apologized for his company’s handling of safety issues. The company’s executives, safety experts and customers will testify at a congressional hearing today at the company attempts to persuade Americans that it cares about its safety. iShares MSCI Japan (NYSEArca: EWJ) is down slightly this morning; Toyota is 5.8%. The fund is down 3.9% in the last month. [For more stories about the auto industry, visit our automobiles category.]

Inverse ETFs can help hedge against bear markets, but if you’re a little shy of risk, there are also plainer ETFs out there that you can use to cope with the market’s wild zigs and zags, says Todd Shriber for Investopedia.

In any market, you can look for opportunities beyond these funds by following a simple strategy. One we recommend is watching the 200-day moving average; when a position is above, it’s a buy signal. When it’s below the trend line, it’s a sell signal. [How to Follow Trends.]

For more stories about ETFs, visit our ETF 101 category.

• PowerShares DB U.S. Dollar Index Bullish (NYSEArca: UUP): In 2009, you couldn’t turn around without hearing about how weak the dollar was. Enter 2010, where a renewed risk appetite has benefited the dollar, which has climbed to eight-month highs. And if gold continues to fall out of favor as a safe haven, the dollar may become even more appealing. [Why the U.S. Dollar Is Looking Up.]



• iShares MSCI Japan Index (NYSEArca: EWJ): This country has lagged the broad market for decades, and for this reason many investors skip over it. Japanese stocks are trading at an above average historical discount to the S&P 500 and, while EWJ is barely positive on the year, it has sharply outperformed many of its emerging markets counterparts, says Shriber. [3 Things Japan Needs.]
  



• SPDR KBW Regional Banking ETF (NYSEArca: KRE): Regional banks are coming out ahead this year, especially as the Obama administration puts the restrictions and regulations upon bigger banks. Plus, many regional banks withstood the mortgage crisis better than the large institutions. [Small Banks Get a Helping Hand.]

Years after a collapsed real estate bubble, an ailing banking system and wasteful spending, Japan has dusted itself off and the country’s leaders are now ready to move ahead. [How Toyota is Impacting Japan's ETFs.]

So far this year, the Tokyo stock exchange is one of the world’s best performers, tax cuts are imminent and small- to mid-size business are going to get some help, reports Alexander Green for Investment U.

There may be an economic renaissance in Japan if it’s successful in these areas, Green says:

• Political and economic policy overhaul: Japan new leadership has the country on the brink of a new economy. After a decade of stagnation, the decisions made now could reverberate for years. [20 Years After Japan's Bubble.]
• Cash flows: Both Japanese investors and consumers have cash on hand and are ready to spend it. If the money filters into the stock market and back into equities, the Tokyo market may see new highs. [Asia's Economic Resilience.]
• Institutional help: Many of the larger investment institutions are weighted low in Japan. Possibly many individual investors are as well. If Japan’s economy takes off, watch the trend lines so you don’t miss out. [How to Follow Trends.]

For more stories about Japan, visit our Japan category.

• iShares MSCI Japan Index (NYSEArca: EWJ)

• WisdomTree Japan SmallCap Dividend Fund (NYSEArca: DFJ)

Western economies are still borrowing money and some (think Greece) are looking at international bailouts. The United States is running record deficits that some fear aren’t sustainable. Asia, however, has stayed conservative toward spending and borrowing since the financial crisis of the late ’90s. [Why Economic Freedom Matters.]

Vikas Bajaj and Keith Bradsher for The New York Times reports that even the Asian economies that shrank during the economic meltdown have escaped the worst. [More Growth Forecast for China.]

Economists say countries have to spend during recessions, increasing deficits and debts. But there are concerns about the long-term effect of the huge debt on the well-being of Europe and the United States. Economists points out that the longer Western economies take to deal with overspending, the more rapid Asia’s dominance on the world stage will be. [Indonesia ETF: Another BRIC in the Wall?]

For more stories about Asia, visit our Asia category.

• iShares FTSE/Xinhua China 25 (NYSEArca: FXI)

• iShares MSCI Malaysia Index (NYSEArca: EWM)

• PowerShares FTSE RAFI Asia ex-Japan Portfolio (NYSEArca:PAF)

• iShares MSCI Japan (NYSEArca: EWJ)
  

About 437,000 Toyota Prius cars and other gas-electric models have been recalled worldwide to fix issues with their braking systems. Hiroko Tabuchi for The New York Times reports that Toyota is recalling 270 plug-in Priuses, 28,000 Lexus HS250hs, and 11,000 Sai hybrids. Older Priuses are unaffected by the problem. Moreover, about 7,300 late-model Camry’s are also on the recall list.

• iShares MSCI Japan Index (NYSEArca: EWJ)

Wholesale inventories dipped 0.8% in December as companies are too doubtful about the recovery of economies to sustainably restock their shelves. Martin Crutsinger for Associated Press reports that a full recovery won’t happen until businesses do restock their shelves to full capacity.

Small business confidence is up, as the outlook for sales improved for the first time in three months. Carlos Torres and Michael McKee for Bloomberg report that despite this, a majority of small businesses expect profit and employment to decline, showing why the Obama administration has announced new plans aimed at providing credit and tax breaks to small firms.

Michelle Chapman for Associated Press reports that Coca-Cola (NYSE: KO) is posting strong overseas growth and this is making up for its more sluggish U.S. numbers. Profits rose 55%, owing mostly to strength in India, China and Latin America.

The euro rose 1.4% after the prospect of financial aid for Greece was floated. Fabio Alves for The Wall Street Journal reports that the German government is putting together a rescue package for Greece, according to FT Deutschland, citing sources in the coalition government. Bilateral support and internationally coordinated assistance at the European Union level are both in the works.

• CurrencyShares Euro Trust (NYSEArca: FXE)

Read the disclaimer, as Tom Lydon is a board member of Rydex|SGI.

Pending home sales rose in December, possibly giving a clue that the Spring buying season will be more plentiful. The National Association of Realtors said Tuesday its seasonally adjusted index of sales agreements rose 1% from November to December to a reading of 96.6, reports Adrian Sainz for Associated Press.

Earnings reports are in for the following:

• UPS (NYSE: UPS) Reports say fourth quarter earnings rose 198% to $757 million from $254 million a year earlier. Earnings per share increased to 75 cents from 25 cents during the same period, reports Business First. iShares Dow Jones Transportation Average (NYSEArca: IYT) is up 0.5% so far today. UPS is 8.1%. [How climate change legislation can boost transportation.]

• Dow Chemical (NYSE: DOW) Q4 earnings  are reported at $172 million before certain items are paid, or $0.18 a share, as compared to a loss of $1.55 billion, or $1.68 a share, in the same period the previous year. DOW’s sales rose 15% to $12.5 billion, says Monica Gerson for Benzinga.

• BP (NYSE: BP) The company posted a 68% rise in adjusted profit for the fourth quarter due to increased oil and gas production and a higher average oil price, but its shares fell more than 5% after it missed analysts’ expectations in refining, reports James Herron for The Wall Street Journal. iShares MSCI EAFE Value Indes (NYSEArca: EFV) holds 3.5% of BP. [Bubble coping strategies.]

Meanwhile, Toyota (NYSE: TM) is struggling to eliminate questions surrounding millions of its vehicles. The automaker announced a fix on Monday to stop gas pedals from possibly sticking and causing cars to speed up unexpectedly. Michelle Maynard and Hiroko Tabuchi for The New York Times reports that the company now faces major uncertainty about the well-being of future sales numbers. The company’s earnings will be released on Thursday.

• iShares MSCI Japan Index (NYSEArca: EWJ) holds 5.4% of Toyota

Inflows into U.S.-listed ETFs focused on international equities totaled $29 billion in 2009, says Morningstar, and 70% of that money went into ETFs linked to indexes provided by MSCI,  a former unit of Morgan Stanley that went public in 2007. John Jannarone for The Wall Street Journal reports that has helped MSCI’s stock rise 71% since the start of 2009.

The ETF business makes up about 19% of MSCI’s revenue, but it’s also the provider’s key driver of growth. Down the line, it looks like MSCI will continue to be a strong name: about 59% of MSCI-backed funds are through BlackRock, the world’s largest ETF provider.

Whether MSCI’s stock is at the top is a question that remains to be answered, but a larger threat is if international investors leave those markets en masse. New ETFs backed by those indexes wouldn’t be large enough to offset a decline like that. [Other major indexes to play with ETFs.]

For more stories about indexing, visit our indexing category.

Among the ETFs that track MSCI indexes include:

• iShares MSCI Emerging Markets (NYSEArca: EEM)
  
• Vanguard Emerging Markets (NYSEArca: VWO)
• ProShares Ultra MSCI EAFE (NYSEArca: EFO)
• iShares MSCI Japan (NYSEArca: EWJ)
• iShares MSCI Brazil (NYSEArca: EWZ)

For full disclosure, Tom Lydon’s clients own shares of EEM and VWO.

The housing market recovery is still in question. Home prices in 20 major cities in November fell 0.2%, following a 0.1% dip in October, reports Lynn Adler for Reuters. The news follows yesterday’s report, which showed that existing home sales plummeted 16.7% in December. It was the largest decline in more than 40 years. [Existing home sales drop.]

On a more positive note, consumer confidence is once again on the rise. Stephen Bernard and Tim Paradis for the Associated Press report that confidence rose to 55.9 in January from 53.6 in December. It was the third straight increase and the highest level in more than a year.

Johnson & Johnson (NYSE: JNJ) reported a healthy jump in fourth-quarter sales. But J&J still saw its stock price fall as its 2010 profit forecast apparently disappointed investors. Sales rose 9%, however, profit dipped 19%or 79 cents per share, reports Linda A. Johnson for Associated Press.

• iShares Dow Jones U.S. Healthcare (NYSEArca: IYH): holds 12.1% of assets in J&J

On a global note, Britain is out of their recession, according to government data showed Tuesday. GDP grew 0.7% over the last three months of 2009, reports David Jolly for The New York Times.

• iShares MSCI United Kingdom (NYSEArca: EWU)

Alison Tudor and Kenneth McCullum for The Wall Street Journal report that Japan is suffering from a deflationary cycle and public spending is down, while the country’s massive borrowing has threatened the rating of the country. The agency specifically cited the new administration’s focus on social spending and a seeming lack of concern for Japan’s borrowing as a reason for its threat to knock Japan’s long-term sovereign debt a notch below its current double-A rating. [Asia ETFs: Why 'economic freedom' matters.]

• iShares MSCI Japan (NYSEArca: EWJ)

Look for Yahoo’s (NASDAQ: YHOO) earnings today, after markets close. Can they follow the strong earnings delivered by other tech majors? [How to play earnings in the tech sector with ETFs.]