President Barack Obama and Dominique Strauss-Kahn, managing director of the International Monetary Fund, both told Chinese officials that letting the yuan appreciate would help the global economy. Chinese President Hu Jintao and other Chinese officials and economists,  however, continue to defend the country’s current currency policy, reports Andrew Batson for The Wall Street Journal. (Why strong yuan may be a good thing)

With exports for the year down about 20% and many manufacturers closed, China is loath to let the yuan appreciate because it would make exports more expensive overseas. Currently, the Chinese economy is recovering at the expense of European and Asian competitors since the U.S. dollar, along with the pegged yuan, is falling. Most private analysts don’t see any changes to China’s policy with the yuan anytime soon.

Strauss-Kahn has stated that China needs to “look more forward to investment and to long-term stability.” A stronger currency would help a Chinese household’s purchasing power, which would support economic growth from within the country.

Not everyone agrees. World Bank Chief Economist and former Chinese government adviser Justin Yifu Lin argues that a stronger yuan could hamper China’s export sector and possibly China’s entire economy, which would have a negative affect on global growth.

According to WisdomTree, there are several factors that favor an appreciating yuan relative to the dollar in years to come:

• Long-term economic growth potential.
• Emerging role as an economic leader in the world arena.
• Diversification away from the dollar by arranging trade agreements using the yuan with other countries.
• A gradual transition from an economic model focused on exports to one focused on domestic consumption.
• Rising yuan valuation as China develops even further. Emerging market currencies are often valued at a discount to long-term purchasing power because of risks associated with emerging markets.

For more information on the Chinese currency, visit our Chines yuan category.

• WisdomTree Dreyfus Chinese Yuan Fund ETF (NYSEArca: CYB): up 1.8% year-to-date; expense ratio is 0.45%

Max Chen contributed to this article.

The U.S. trade deficit grew to a more-than-expected $36.5 billion in September, and 60.5% of the deficit was to China alone, writes Justin Fox for TIME. The U.S.-China economic relationship won’t be resolved anytime soon because of U.S.-based corporations selling products that were partly or entirely made in China. The more important fact, however, is that there is no way to ignore a rising political and military power like China. (Reasons to watch China).

The trade model between China and the United States remains unchanged, with China keeping the yuan artificially low and focusing on its export industries while the United States incurs a higher trade deficit and more debt, remarks Mark Trumbull for The Christian Science Monitor. (Is a strong Chinese yuan a good thing?)

Obama has not shown any pushback against China’s seemingly non-free market policies, despite promises on a tougher stance on China. However, economists are doubtful that any pushback would occur, citing several reasons:

• The tougher approach could result in higher-priced goods for U.S. consumers and the protectionism would rapidly spread to other nations, putting up trade barriers.
• China’s manufacturing power is not slowing one bit.
• An adjusted yuan won’t necessarily help U.S. manufacturers.
• The United States doesn’t have much leverage on China since China is the country’s main lender.

U.S. trade representative Ron Kirk stated that the United States wants trade and investment barriers removed to promote an open global trade system and Obama wants the United States to pursue “pragmatic cooperation” with Beijing, according to BBC News. Obama also urged Asian countries to break away from their dependence on exports and pursue “balanced,” sustainable growth.

For more information on China, visit our China category.

• iShares FTSE/Xinhua China 25 Index (NYSEArca: FXI): up 58.2% year-to-date

• SPDR S&P China (NYSEArca: GXC): up 66.8% year-to-date

• PowerShares Golden Dragon Halter USX China (NYSEArca: PGJ): up 65.9% year-to-date

• Claymore/AlphaShares China Small Cap (NYSEArca: HAO): up 96.5% year-to-date

• Claymore/AlphaShares China All-Cap ETF (NYSEArca: YAO): recently launched

Max Chen contributed to this article.

ETFs are a good way for investors to capitalize on policy initiatives of the Obama administration while reducing the day-to-day volatility compared to other investment options, such as stocks, remarks Daniel Harrison for IndexUniverse. (Play Obama’s new energy plan).

Health Care opportunities. Jim Oberweis, chief executive of Oberweis Asset Management, believes that “there is a possible positive [outcome] for pharmaceutical companies” since sales of prescription drugs will increase as health care coverage widens. Furthermore, Oberweis argues that health care providers may benefit from more patient visits and biotechs are in a more positive position than previously thought. (More on the health care sector).

Broad-based and niche market ETFs that could benefit from the growth in the number of patients receiving coverage include:

• Health Care Select Sector SPDR (NYSEArca: XLV): up 14.3% year-to-date
• iShares Dow Jones U.S. Healthcare (NYSEArca: IYH): up 15.1% year-to-date
• iShares Dow Jones U.S. Medical Devices (NYSEArca: IHI): up 32.4% year-to-date; IHI is well-diversified, with 58% of assets under management in its top 10 holdings, and a maximum single-stock weighting of 10%. Companies included should benefit from the increase in the number of hospital patient visits.
• PowerShares Dynamic Pharmaceuticals (NYSEArca: PJP): up 10.3% year-to-date; PJP is a well-diversified ETF on large, mostly dividend-paying pharmaceutical companies that have lots of cash on hand and may see an increase in sales of core prescription drugs.
• SPDR S&P Pharmaceuticals (NYSEArca: XPH): up 19.2% year-to-date; XPH is more broadly diversified.
• iShares Dow Jones US Pharmaceuticals (NYSEArca: IHE): up 22.2% year-to-date; IHE focuses more on the oversold traditional pharma brands like PJP.
• SPDR S&P Biotech (NYSEArca: XBI): down 4.3% year-to-date; XBI is well-diversified, with 45% of its funds invested in its top 10 holdings. The fund is also mostly invested in nontraditional pharma companies.
• iShares Nasdaq Biotechnology (NasdaqGM: IBB): up 11.2% year-to-date; IBB has a higher weighting in its top holdings and it focuses exclusively on Nasdaq-listed securities; some large biotech companies may be excluded.

Clean energy. It is no big secret that clean energy is a big policy initiative of the Obama administration. The more notable technologies being pushed into the forefront of the sector are nuclear and solar energy. Solar tech investing is still considered risky because of the industry’s mini boom/bust cycles, but ETFs help minimize volatility. (More on alternative energy).

• Market Vectors Solar Energy ETF (NYSEArca: KWT): down 6.5% year-to-date
• Claymore/MAC Global Solar Energy (NYSEArca: TAN): up 0.3% year-to-date
• Market Vectors Nuclear Energy ETF (NYSEArca: NLR): up 19.7% year-to-date

Max Chen contributed to this article.

We are about two steps away from health insurance reform in America, says Obama. Stephanie Condon for CBS News reports that Democrats in the House managed late Saturday night to pass their comprehensive health care bill by a vote of 220 to 215. Meanwhile, 39 Democrats voted against the bill, even after adding to the legislation a strict anti-abortion measure intended to earn the support of moderates.

Don Dion for TheStreet reports that even as public support for the health care bill wanes, there’s hope yet for the sector’s ETFs. (Why health care reform still looks good). The downward trend for providers could reverse as voters turn their backs on the ambitious health care overhaul. Voters are apparently dissatisfied with Obama’s policies.  (How has health care affected ETFs so far?)

On the other hand, if health care reform goes through, some ETFs could see their holdings change as some constituents are legislated out of existence by the new laws.

As the health insurance and health care industry stand to gain from about tens of millions of customers, the industry is still complaining. Duff Wilson and Reed Abelson for The New York Times report that insurers do not like the idea of a government-run insurance program. Drug makers oppose billions of dollars in rebates they would have to give to the government over 10 years. Meanwhile, medical device providers would have to give a 2.5% tax to the government on their products. Also, employers large and small oppose rules that, for many of them, would make health care coverage — long a job benefit — become a federally-mandated obligation.

For more stories about health care, visit our health care category.

• iShares Dow Jones U.S. Health Care Providers (NYSEArca: IHF): up 26.9% year-to-date

• PowerShares Dynamic Health Care Services (NYSEArca: PTJ): up 10.3% year-to-date

U.S. consumer sentiment declined this month while Americans continued to worry about their finances and paying down their debts. Despite the drop, sentiment is higher than it was a year ago at this time, reports Steven C. Johnson for Reuters. Most consumers felt that their financial situations  had worsened in October for the 13th consecutive month. It’s the longest and deepest decline in the survey’s history. (Can bargains be found in luxury ETF?)

Consumer spending in September also dropped by the largest amount in nine months. This comes despite a government report showing that the economy grew 3.5% in the third quarter and shows how shaky the economy still is. (The GDP report). Economists fear the consumers are going to continue cutting back, making for a rocky road to recovery, reports Martin Crutsinger for the Associated Press.

• Vanguard Consumer Discretionary (NYSE: VCR) is down about 0.5% this morning

President Barack Obama said today that the stimulus plan created or saved about 650,000 jobs. The numbers are the first solid look at how the program has impacted the economy, CNN Money says. Administration officials say that 3.5 million jobs will have been created or saved by the time the program comes to a close.

Chevron (NYSE: CVX) reported that its profits slipped 51%. The oil giant was able to boost revenues by increasing its oil production by 11% in the third quarter, the Associated Press reports. (Five factors benefiting oil ETFs).

• PowerShares Dynamic Energy Exploration & Production (NYSEArca: PXE) is down nearly 2% this morning; Chevron is 5.5%

For more stories on energy, visit or energy sector page.

Under the Recovery Act, counties are allocated large sums of low-interest bonds to give to private projects.  However, there are pros and cons to the Obama administration’s efforts to stimulate the economy.  Investment projects — especially for infrastructure and new technologies — produce limited, delayed results. Programs intended to keep people afloat seem to do the most to lift the economy, states Charles Euchner of The New York Times.

Additionally, the program gives priority to shovel-ready projects, but these take a long time to get going and positively influence the economy.  Infrastructure projects are beneficial because they not only put construction workers on the job, they also create a foundation for new waves of economic growth. Additionally, highways, airports and rail lines could increase the efficiency of local economies, and research and development could lead to innovation.  (Where infrastructure ETFs go from here).

Another problem with stimulus funding, experts say, is that dubious projects too often jump to the head of the line.  Projects with political backing win funding, regardless of merit, while more worthwhile projects languish for decades.  (The stimulus effort has its critics.)

For more stories on infrastructure, visit our infrastructure category.

Two ETFs that have been hindered by this lag is the SPDR/FTSE Macquarie Global Infrastructure Fund (NYSEArca: GII) up 2.7% year-to-date; and iShares S&P Global Infrastructure (NYSEArca: IGF), up 12.4% year-to-date.

Kevin Grewal contributed to this article.

The Obama Administration has announced that it’s investing $3.4 billion in order to fund this project. Through the plan, 100 private companies, utilities, cities and manufacturers will receive grants ranging from $400,000 to $200 million in order to build a smart energy grid, reports Lynn Sweet for The Chicago Sun-Times. So far, these awards are the largest Recovery Act awards ever made on one day. (Nine things that could affect alternative energy).

Analysis shows that by getting smart grid technology off the ground, it could reduce electricity use by at least 4% by 2030. This would result in savings of $20.4 billion for both businesses and consumers. (Does this mean alternative energy is not so alternative anymore?)

The Senate environment committee also released details of its climate change legislation, which includes the share of “emissions allowances,” which is revenue that comes from regulation of a cap-and-trade system – once it’s in place. The Senate has nearly tripled the share of allowances set aside by the House for transit, inter-city rail, and other efforts to trim transport-based emissions. Elana Schor for Streetsblog reports that the Senate measure would set aside more than 3% of allowances in the first two years of the cap-and-trade system for limiting pollution from the transportation sector.

For more stories about clean energy, visit our alternative energy category.

• First Trust NASDAQ Clean Edge Green Energy (Nasdaq: QCLN)
• iShares Dow Jones U.S. Utilities (NYSEArca: IDU)
• iShares S&P Global Infrastructure (NYSEArca: IGF)
• iShares S&P Global Clean Energy (NYSEArca: ICLN)
• PowerShares WilderHill Clean Energy (NYSEArca: PBW)
  
• PowerShares Global Clean Energy (NYSEArca: PBD)
• PowerShares Cleantech (NYSEArca: PZD)
• PowerShares Dynamic Utilities (NYSEArca: PUI)
• Utilities Select Sector (NYSEArca: XLU)
• Vanguard Utilities (NYSEArca: VPU)
• SPDR FTSE/Macquarie Global Infrastructure 100 (NYSEArca: GII)

Here are some points in favor of the aerospace and defense industy:

• Defense Industry Daily says that momentum had been building to sell the F-22A Raptor overseas to countries considered allied with the United States, such as Japan. But F-22 production is set to end sometime around 2010; exporting them could delay the need to make a decision. As far as Japan goes, the F-22 “is at the top of their list.”
• Mike Allen for San Diego Business Journal reports that this industry could be one of the major employment opportunities in the United States. General Atomics, which makes the unmanned drones used extensively in the Middle East wars, has added 800 jobs in the past year.
• Meanwhile, the Navy plans to commission a new amphibious assault ship, the USS Makin Island, this week, and next year the USS Carl Vinson becomes the third aircraft carrier to be home-ported locally.
• The ongoing strife in Afghanistan has led to a dilemma for Obama, who needs to decide whether to send more troops. If troops are increased again, it could keep defense spending elevated. Also worth noting is that, according to Martha Raddatz at ABC News, the troops that were part of the increase ordered in February are still not there yet. This is because the military needs time to organize the supplies these additional forces will need.

On the downside, Boeing (NYSE: BA) reported a $1.6 billion loss in the third quarter, thanks to delays in the 787 Dreamliner program.

For more stories about aerospace, visit our aerospace and defense category.

• PowerShares Aerospace & Defense (NYSEArca: PPA): up 16.9% year-to-date

• iShares Dow Jones U.S. Aerospace & Defense (NYSEArca: ITA): up 17.3% year-to-date

The Fed is expected to make its announcement this afternoon. The U.S. Central Bank will likely keep rates at zero, but investors are waiting for indications of when interest rates may rise as well as clues about the strength of the economic recovery. The announcement will be made at 2:15 ET.

In the earnings arena, foodmaker General Mills (NYSE: GIS) reported a 51% increase in profits on lower ingredient costs and strong demand for its products. The maker of Cheerios reported quarterly earnings of $1.28/share, beating Wall Street’s expectations of $1.03/share.  The company has witnessed increases in sales as more people are choosing to dine at home.  The news sent the PowerShares Dynamic Food & Beverage (NYSEArca: PBJ) up 0.1% in morning trading.

In the real estate sector, mortgage applications jumped to their highest levels since May when interest rates were below 5%, states Julie Haviv for Reuters.  The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications for the week ending Sept. 18 increased 12.8% to 668.5.  This increase was fueled by consumer desire to refinance loans as well as obtain new mortgages to purchase homes.  Despite the news, the iShares Dow Jones Real Estate (NYSEArca: IYR) was down 1.4% in morning trading.

Globally speaking, the G-20 summit is taking place in Pittsburgh were President Barack Obama is trying to convince European leaders to impose more stringent rules and regulations on bank pay limits.  Some believe this will be tough, as European countries are becoming increasingly impatient at the pace of action on climate change and financial regulation in the U.S. Congress and by the Obama administration.

Overall, the Dow Jones Industrial Average dropped 0.2%, the S&P 500 was down 0.3% and the Nasdaq gave up 0.1% in morning trading.

For more stories on real estate, visit our real estate category.

Kevin Grewal contributed to this article.

Chu believes that the 30%-40% emission reduction goal in the United States is an aggressive but technically possible goal. Matthew McDermott for TreeHugger reports that developing nations such as China, Brazil and India are calling on the United States to make these changes happen.

The big business and politics in the United States makes what is politically achievable (in terms of emission reduction commitments) far, far lower than what it is other nations. Foon Rhee for Political Intelligence reports that Rep. Edward J. Markey (D – Mass.) supports the Obama administration for their latest higher fuel efficiency and emissions requirements for cars and tracks. The proposed standards include:

• The auto industry’s fleet of new vehicles to average 35.5 miles per gallon by 2016.
• Vehicle model years 2012 through 2016 are included and allow automakers to comply with all federal requirements as well as standards pushed by California, Massachusetts, and about a dozen other states.
• The consumer demand for fuel-efficient cars was evident in the “cash for clunkers” program. The bill will help keep showrooms stocked with these vehicles.
• The administration estimates the requirements would cost up to $1,300 per new vehicle by 2016, but would save the average driver $3,000 in fuel costs over the life of the vehicle.
• The new standards would save 1.8 billion barrels of oil over the lifetime of the vehicles purchased during 2012-16 and would cut global warming pollution by 950 million metric tons of total carbon dioxide equivalent emissions, according to Markey’s office.

The Green Investor on Seeking Alpha has some ways to invest in the green movement, and capture some of the effects of the recent legislation:

• Market Vectors Global Alternative Energy (NYSEArca: GEX): up 13.8% year-to-date

• PowerShares Cleantech Portfolio (NYSEArca: PZD): up 33.2% year-to-date

• iShares S&P Global Clean Energy Index Fund (NYSEArca: ICLN): up 13.2% year-to-date

For more stories about green energy, visit our alternative energy category.