What finally sent the index over the top?

• The cash for clunkers program has really made a difference for the auto industry, so much so that dealerships are starting to run out of cars to sell, reports Bill Radke for Marketplace Morning Report.

• Ford (F) numbers are up 2% in July year-over-year and Subaru predicts a 30% increase in sales. The program’s goal was to get 10 million in new car sales, which could help bring GM and Chrysler back out of the red to break even.

• Manufacturing activity continued to decline last month but at its slowest pace in nearly a year.

• Construction spending continued to rise in June for the third consecutive month.

All the good news helped push the S&P 500 past the 1,000 mark, a point last seen in fall of 2008. Economist Diane Swonk sees that the previous “Armageddon” mindset has abated and investors are no longer comparing the markets to that of the Great Depression. Firms are beginning to provide guidance and some future outlook.

There are a number of ways investors can play this move, including ETFs that divide up the S&P 500 into sectors or asset classes:

• SPDRs S&P 500 (SPY): up 11% year-to-date

• iShares S&P 500 Index (IVV): up 12.8% year-to-date

For more information on the S&P 500, visit our S&P 500 category.

Max Chen contributed to this article.

Bryan Keller of Seeking Alpha states the following reasons why these stocks are attractive to investors:

• They are household names, are the most recognizable stocks to the general public and information on them can be found just about anywhere

• They have very attractive valuations when compared to small-cap or mid-cap stocks

• Have stable business models and are not pressured to expand or get their hands on the next big innovation

• Many of these companies are self-funding, meaning they don’t need to issue debt or additional stock to fund the business – stability lures the average investor in

• Current crisis notwithstanding, they’ve shown a past ability to weather an economic downturn, challenged but intact

Bigger is not always necessarily better. I don’t know about you, but a super-sized value meal at McDonalds (MCD) doesn’t seem like a good thing to me, and I don’t know how many people really need that 108-inch television in their living rooms. And another thing: few have been immune from the economic downturn – and that includes large caps. Bank of America (BAC), Microsoft (MSFT), JP Morgan (JPM) and other mega companies have all taken serious hits lately.

Also be sure to know what you own when looking at large-cap ETFs, because although they’re diversified, many of them have weightings in financials, a sector many investors might be leery of for the time being.

Large caps have been beaten up as of late, though – watch the trend lines if you’re looking for opportunities. If you do want to grab some exposure to the big boys of the capitalization world, here are a few ETFs to take a look at.

• Vanguard Large-Cap ETF (VV): Follows the top 750 U.S. large-cap stocks; top holdings are Exxon Mobil (XOM), 3.7%; General Electric (GE), 2.3% and Microsoft, 2%.

• iShares S&P 500 (IVV): tracks the same index as the SPY, down 4.92% over the last month; top holdings include Exxon Mobil, 5.2%; Procter & Gamble (PG), 2.4% an General Electric, 2.2%.

• SPDRSs (SPY), holds one-tenth of its assets in mega cap stocks, down 4.99% over the last month; top holdings include Exxon Mobil, 5.1%; General Electric, 2.2%; and Johnson & Johnson (JNJ), 2.1%.

Consumer buying habits appear to be evolving with the economy, meaning that the consumer is looking for ways and places to shop that stretch their dollar. The Chief Executive Officer of Wal-Mart (WMT) H. Lee Scott Jr. thinks that the typical American consumer is really concerned about their job right now, leading to a change in the way they spend their money, reports Horacio Marquesfor Money Morning.

Proof of the change in spending habits is evidenced by the world’s largest retailer, Wal-Mart, who last month reported a 10% jump in its third-quarter earnings per share; the company’s sales jumped 10%. A double-digit gain in profits during a recession isn’t so bad.

Changes within consumerism is also found on the pharmaceutical level, where there is an increase in self-treatment; more consumers are cooking at home and purchasing frozen items that store well; small business owners also alter their business pattern to match cash flow, meaning more frequent trips for one days’ supply, especially on the small restaurant level. Wal-Mart stores are accommodating to all of these shifts.

• Retail HOLDRs (RTH): down 18.4% year-to-date; Wal-Mart is 26.4%

• PowerShares Dynamic Retail (PMR): down 19.7% year-to-date; Wal-Mart 5.4%

Meanwhile, Proctor and Gamble (PG) has cut their second quarter 2009 outlook as they are not able to meet basic sales target growth. This includes sales from acquisitions, of 4-6% due to the stronger dollar and weakness because of private brands, explains Vinya Ayala for Daily Markets.

• Vanguard Consumer Staples (VDC): down 18.4% year-to-date; P&G 14.8%; Wal-Mart is 9.5%

In general, the money invested in traditional stock exchange-traded funds appears safe from rampaging credit markets; not safe from market movements, of course, but safe from the kind of credit risks that killed the Lehman ETNs, reports Matthew Hougan for Index Universe.

For example, the investment into iShares S&P 500 Index Fund (IVV) is like buying a sliver of of each of the 500 stocks held by those funds. This is different than an ETN, where you are buying a debt note from the underwriting bank.

Fixed-income funds operate much like traditional equity ETFs, in which investors hold a pro-rata share of the underlying markets. All such funds are exposed to the risks of the fixed-income market, which include defaults and even illiquidity.

Precious metals funds are very safe, Hougan says, as they hold the metals as their sole asset. The metal is stored in a vault with a custodian bank, and while there are scenarios in which the holdings could be lost, they’re extraordinary. Most currency ETFs hold the currency as their sole asset, meaning that they’re essentially bank accounts that come with all the rights and risks of other bank accounts.

ETFs have been scrutinized as of late and one of the biggest questions has to do with tracking error. Most of the tracking error presented is actually a positive thing, says Jim Wiandt for Seeking Alpha.

Much of the tracking error occurring now is due to cash being king right now, share lending, managing cash flow, and index changes. The more cash at hand, the more positive tracking error you get in your ETFs for the moment.

Last year, 17 out of 20 of the largest mutual fund companies were using them last year. Providers that are most popular among managers are Barclays Global Investors, State Street Global Advisors, Vanguard Group and Invesco PowerShares.

So, is this acceptance much more than an endorsement of the ETFs value for active managers? Some say it indicates how hard single-stock selection can be. One of the main ways that managers are using ETFs is for cash equalization or “parking” cash in ETFs for a short time period until the fund invests in single stocks, reports David Hoffman for Investment News.

It turns out to be proper for a fund manager to also use ETFs for a long-term sector rotation strategy, as long as the client is aware of this. Despite concerns or naysayers, it is evident that mutual funds will continue to use ETFs for their advantage.

According to a study by SSGA, the top ETFs among mutual funds by assets are:

• iShares Russell 2000 ETF (IWM) $1.8 billion
• iShares S&P 500 ETF (IVV) $1.4 billion
• SPDR S&P 500 (SPY) $1.3 billion

Despite the valuations, do not be fooled, there is still some uncertainty with large-caps and the market in general. The economy is not settled yet, and may sink more. The presidential elections have a lot to do with the future of capital gains rates, as well, reports Billy Fisher for The Street. Furthermore, large-caps have fallen off so much because of their heavy exposure to the beleaguered financial industry.

Small-caps are performing better because they don’t have the exposure to the Lehmans and the AIGs.

As a sign of the time for financials and large caps: AIG (AIG) has been booted out of the Dow Jones Industrial Average and replaced with Kraft (KFT). Kraft is the world’s second-largest food maker, and its addition to the fund leaves the Dow underweight in financials, reports Dow Jones Newswires.

The most beaten-down areas provide the best opportunity for growth when there’s a market recovery in the works. When that happens, it’s worth keeping an eye on those sectors. Large-cap ETFs provide even and affordable exposure to large-cap shares such as:

• iShares S&P 500 Growth Index (IVW), down 15.1% year-to-date
• iShares S&P 500 Index (IVV), down 16.1% year-to-date
• iShares S&P 500 Value Index (IVE), down 17% year-to-date

Investors shouldn’t consider entering this or any other asset class until they are above their trendlines. So far, large-cap value is down 9.4% for the past six months, blend is down 7.1%, and growth is down 4.5%.

European and Japanese companies are suffering as much or more than U.S. large-cap companies, and growth and profit numbers are pointing toward possibility of a global recession, although we are not technically experiencing one right now, reports Carl Delfeld for ETF XRAY.

In the last week, the Dow is down 2.5%, while the S&P 500 is off by 4.2%. Asia is down about 5%, and Latin America has lost about 12.3% in that same time period.

Sharp pullbacks such as these can provide investors with opportunities to position themselves, but we think they should stick to the strategy of waiting until these areas cross back over their 200-day moving averages.

• iShares S&P 500 Growth Index (IVW): down 15.2% year-to-date; down 11.4% in the last three months
• iShares S&P 500 Index (IVV): down 16% year-to-date; down 9.7% in the last three months
• iShares S&P 500 Value Index (IVE): down 16.9% year-to-date; down 7.8% in the last three months

Large-caps are the most common and popular investing asset class, and they are easy to compare because their make-up is similar.

Will McClatchy for ETF Zone gives us an in-depth look at the different large-cap ETFs on the market, to help you decide which fund works best for your goals.

• SPDRs (SPY): Holds one-tenth of all ETF assets above $70 million; pays quarterly; down 10.6% year-to-date.
• iShares S&P 500 (IVV): tracks the same index as SPY, yet charges 0.1% less than SPY; pays bi-annually; down 10.6% year-to-date.

In terms of returns, SPY and IVV are pretty much right in line with one another. McClatchy also notes that SPY may be one of those ETFs with innovative managers who are making index changes efficiently. Smaller spreads may be executed behind the scenes by the specialists.

Large-cap firms are more likely to be mixing in with foreign currencies due to the breadth of their market cap. There is the added attribute of hedging the U.S. dollar, if that is a plus for you. Other large-caps ETFs available:

• Vanguard Large-Cap ETF (VV): follows top 750 U.S. large-cap stocks; expense ratio 0.7%; down 10.1% year-to-date.
• SPDR Dow Jones Wilshire Large-Cap (ELR): 0.20% expense ratio; follows top 750 U.S. large-caps stocks; down 11.2% year-to-date.
• SPA Market Grader Large Cap 100 (SZG): Has a basket of 100 stocks, with an expense ratio of 0.85%; down 15.1% year-to-date.
• Rydex Russell Top 50 (XLG): Has a basket of 50 stocks and an expense ratio of 0.20%; down 12.2% year-to-date.