The economy grew 3.5% in the third quarter, its best performance in two years. Spending on homes and new cars, as part of the “cash for clunkers” program, contributed to the growth, reports Jeannine Aversa for the Associated Press. What it means going forward is in doubt, because if unemployment continues to rise it will hamper consumer spending. (A holiday shopping ETF?)

This week, the job markets got a reprieve: claims fell more than forecast to their lowest point in seven months, reports Courtney Schlisserman for Bloomberg. It was also the biggest drop since July. Companies appear to be cutting fewer jobs as signs of an economic recovery emerge.

Treasury Secretary Timothy Geithner spoke today about financial reform and said that new legislation will not lead to bailouts. The Obama administration wants laws that would give federal regulators to power to identify and monitor major banks so they can be wound down before collapsing, reports Anne Flaherty for the Associated Press. The law is intended to prevent putting the government in a position where it needs to decide between a big rescue or allowing the bank to fail. (How to harness the financial sector recovery).

A slew of earnings came forth this morning:

• Procter & Gamble (NYSE: PG) reported their first-quarter earnings, which were better than expected.  Profits were off 1%, but Procter & Gamble has pledged to be aggressive in winning back market share.
• Exxon Mobil (NYSE: XOM) said its profits dropped 68% in the third quarter. While the results were the best of the year so far, but Exxon has not reported such low quarterly profits in four years. Energy Select Sector SPDR (NYSEArca: XLE) is up 1.5% this morning; XOM is 21.4%.



• Motorola (NYSE: MOT) had an unexpected third-quarter profit, thanks to narrowing losses in its cell phone division. It was their second consecutive quarterly profit this year. (Four reasons to watch global telecom).
• Kellogg (NYSE: K) benefited from brand loyalty, which delivered a 6% boost to its profits last quarter. More consumers are eating at home, and they view Kellogg’s cereals as a staple. PowerShares Dynamic Food & Beverage (NYSEArca: PBJ) is up about 1% this morning; Kellogg is 5.2%.

Jefferies

The next two ETFs that Jefferies has in the works are going to focus on the energy markets: Jefferies Natural Gas Equity ETF and the Energy Wildcatters Equity ETF.

ETF Daily News reports that the ETFs are in a direct competition with already existing funds, and will mainly focus in the energy sector.

These funds are designed to give exposure to the companies involved in production, transportation and storage within the energy commodity category. The natural gas fund will require that involved companies obtain 50% of their annual revenue from the exploration and production of natural gas. You can read more about what’s happening with natural gas here.

Some existing ETFS that hold the stock of natural gas and energy producers include:

• First Trust ISE-Revere Natural Gas (NYSEArca: FCG): up 48.3% year-to-date

• Energy Select Sector SDPR (NYSEArca: XLE): up 19.5% year-to-date

The filing is fresh after a recent commodity ETF launch from Jefferies.

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

Investors still have to decide on which industries are best positioned to perform well in the recovery, remarks Matt Krantz for USA Today. Possibly the worst thing any investor could do is jump in after sectors that have already gained, continually chasing performance.

After betting on financials and tech companies, investors are now looking for actual economic growth in the second half of the year, especially in consumer discretionary companies that make big-ticket items such as automobiles and appliances. Krantz notes, however, that investors are applying prudent techniques when picking out future winning sectors:

History. Certain sectors and certain companies do better at certain points of an economic cycle. If the past repeats itself, solid performance could come out of consumer discretionary stocks, along with materials and industrial companies. These “cyclical” sectors could gain as demand for goods picks up. Later, energy stocks could gain as companies expand to cover all the demand.

• Consumer Direct Select Sector SPDR (NYSEArca: XLY): up 30% year-to date
• iShares Dow Jones U.S. Basic Materials (NYSEArca: IYM): up 55% year-to-date
• SPDR Select Sector Fund- Basic Industries (NYSEArca: XLB): up 43% year-to-date
• Energy Select Sector Energy Fund (NYSEArca: XLE): up 17.7% year-to-date

Cycles. Growth in revenue is still down and may continue to be so in the third quarter, but some businesses could show early growth. The businesses that will perform will be the ones to stop cost cutting and start expanding. This is one of the reasons why financials may continue to benefit as demand for loans increases.

• SPDR Financial Select Sector (NYSEArca: XLF): up 23.3% year-to-date

Diamonds in the rough. Some small banks and brokers may stand out by enticing customers who have become estranged from large financial firms. Modernization of bridges and roads will lead to a boom in the infrastructure industry. Government investment into green tech will also likely help the alternative energy industry. As more companies use the internet to conduct business, business that build internet networking systems may also become in demand.

• iShares S&P Global Infrastructure (NYSEArca: IGF): up 13.8% year-to-date
• PowerShares Wilderhill Clean Energy Portfolio Fund (NYSEArca: PBW): up 28.9% year-to-date
• iShares Networking Fund (NYSEArca: IGN): up 61.7% year-to-date

Not so good. Sectors dependent on consumers may not see previous cash flows for awhile yet. Businesses such as retailers, restaurants and casinos may also continue to struggle.

Watch the trends. There’s no such thing as a “sure thing” in the markets, otherwise no one would ever lose anything. We can all guess which sectors will perform and which won’t, but reality could bear out differently. Watch the trend lines to spot the true opportunities, and have a stop loss in place, as well.

Max Chen contributed to this article.

ETF trading volume jumped from $142 billion in 2004 to $3 trillion in 2008, and settling around $1.4 trillion in June 2009, write Yan Zilbering and Donald Bennyhoff for IndexUniverse. Since 2008, nost of the ETF trading volume has been centered around a narrow selection of ETFs from the 850 or so available as of June 2009.

The top 20 most heavily traded ETFs by dollar volume amount to around 80% of total ETF trades. At the forefront are the most established ETFs with the most assets that are popular among investors of all types. The included ETFs account for about 50% of all ETF trading volume and they track the most common, broad-based domestic indexes:

• SPDRs S&P 500 (SPY): avg. daily turnover since Jan. 2008 is 43%
• PowerShares QQQ (QQQQ): avg. daily turnover since Jan. 2008 is 43%
• iShares Russell 2000 Index (IWM): avg. daily turnover since Jan. 2008 is 54%
• DIAMONDS Trust, Series 1 (DIA): avg. daily turnover since Jan. 2008 is 28%

There are also a group of nine narrowly focused sector and sub-sector ETFs, which represent around 16% of ETF trades, used to implement various strategies through the easy access of specific areas of the market.

• Financial Select Sector SPDR (XLF): avg. daily turnover since Jan. 2008 is 45%
• Energy Select Sector SPDR (XLE): avg. daily turnover since Jan. 2008 is 40%
• Oil Services HOLDRs (OIH): avg. daily turnover since Jan. 2008 is 54%
• SPDR Gold Shares (GLD): avg. daily turnover since Jan. 2008 is 6%
• iShares Dow Jones US Real Estate (IYR): avg. daily turnover since Jan. 2008 is 58%
• iShares MSCI EAFE Index (EFA): avg. daily turnover since Jan. 2008 is 4%
• iShares MSCI Emerging Markets Index (EEM): avg. daily turnover since Jan. 2008 is 12%
• iShares FTSE/Xinhua China 25 Index (FXI): avg. daily turnover since Jan. 2008 is 20%
• iShares MSCI Brazil Index (EWZ): avg. daily turnover since Jan. 2008 is 18%

The last set includes seven leveraged ETFs, which produce the multiple or inverse returns of the broad market or sector. This group is usually used for capitalizing on the short-term movements in the markets.

• Ultra S&P500 ProShares (SSO): avg. daily turnover since Jan. 2008 is 61%
• UltraShort S&P500 ProShares (SDS): avg. daily turnover since Jan. 2008 is 109%
• Ultra QQQ ProShares (QLD): avg. daily turnover since Jan. 2008 is 90%
• UltraShort QQQ ProShares (QID): avg. daily turnover since Jan. 2008 is 178%
• UltraShort Financials ProShares (SKF): avg. daily turnover since Jan. 2008 is 242%
• Direxion Daily Financial Bull 3X Shares (FAS): avg. daily turnover since Jan. 2008 is 128%
• Direxion Daily Financial Bear 3X Shares (FAZ): avg. daily turnover since Jan. 2008 is 241%

By looking at the data, it is noticeable that the more heavily traded ETFs traded at a higher turnover rate. ETFs tracking volatile sectors have been traded at even higher levels.

Max Chen contributed to this article.

The Labor Department reported that new claims for unemployment insurance increased by 25,000 to a seasonally adjusted 584,000, higher than the 570,000 expected by analysts.  But on a positive note, the same report indicated that the number of Americans receiving unemployment benefits fell to 6.2 million from 6.23 million last week. Analysts anticipated an increase to 6.3 million.

As for earnings reports, they were lead by the world’s largest publicly traded oil company, Exxon Mobil (XOM), which witnessed a 66% drop in profits.  The company reported second-quarter earnings of $0.81/share and fell short of Wall Street’s expectation of $1.02/share.  Despite this news, the Energy Select SPDR (XLE) gained 1.2% in morning trading; XOM is 22.9%.

Other earnings:

• Colgate-Palmolive (CL) stated that its cost-cutting measures overshadowed a weaker U.S. dollar and consumer spending sentiment and reported an increase in its quarterly earnings.  The toothpaste maker reported profits of $1.07/share beating analysts’ expectations of $1.05/share.
• Electronics company Motorola (MOT) impressed both itself and Wall Street when it reported earnings of $0.01/share.  This profit was primarily driven by scaling back on costs and slashing of jobs.
• Chemical giant Dow Chemical (DOW) kept the ball rolling by reporting quarterly earnings of $0.05/share and beating Wall Street’s expectations of a loss of $0.08/share.
• Although enrollment fell at health insurer Cigna Corp. (CI), the Philadelphia-based company reported an increase in earnings of 60% on a more favorable interest rate, or $1.58/share as compared to the $0.96/share forecast by analysts.

In other news, bond prices fell as investors moved out of safer investments and into stocks. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.71% from 3.67% late Wednesday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.18% from 0.17% late Wednesday.  The iShares Lehman 7-10 Yr Treasury (IEF) was down 0.1% in morning trading.

On a separate note, health care continues to remain a hot topic as many are wary about how the government will overhaul an industry that constitutes such a big part of the economy.  Many are concerned that a costly overhaul of the industry will result in poor quality and fewer choices.  The bill has to make it past the House of Representatives’ Energy and Commerce Committee first, then will be re-drafted and, if approved, sent to the President for signature later on in the year.

Overall, all three major U.S. indices are trading up with the S&P 500 leading the pact gaining 1.8%, followed by the Nasdaq which is up 1.7% and the Dow Jones Industrial Average up 1.5%.

For more stories on energy, visit our energy category.

Kevin Grewal contributed to this article.

June marked the third straight month that economic indicators rose more than expected.  More plans to build homes, fewer pink slips being handed out and higher stock prices sent the New-York based Conference Board’s index of leading economic indicators up 0.7% last month beating analysts’ expectations of a 0.4% increase.  Of the 10 economic indicators that the index tracks, seven gained ground in June with the interest rate spread leading the pack.

In financial news, business lender CIT Group’s (CIT) board of directors approved a deal with major bondholders approving $3 billion in a rescue loan to keep the company out of bankruptcy.  This loan will provide temporary financing to launch an exchange of outstanding debt for equity, comes with a hefty interest rate of 10.5% and will force the company to put up some of its highest quality loans up as collateral against the loan. This comes a few days after the federal government refused to bailout CIT.

Oilfield services company Halliburton (HAL) reported that its second-quarter profits declined by 48% as sluggish exploration and production activity dampened the bottom line.  The company reported net income of $0.29/share and beat Wall Street’s expectations of $0.27/share.  Despite the outperformance, the company painted somewhat of a bleak future for the remaining of the year, sending the iShares Dow Jones U.S. Oil Equipment Index (IEZ) down 0.6% in morning trading.

Diversified manufacturer Eaton Corp. (ETN), which makes parts for airplanes, vehicles and electrical equipment reported a plunge of 92% in second-quarter earnings, or $0.23/share.  On the upside, the weak sales seen by the company still enabled them to beat Wall Street’s anticipation of $0.17/share.

Another indicator that the recession may be coming to an end is the price of oil companies.  Oil and gas producers are the cheapest they have been in the last 14 years, state Rita Nazareth and Michael Tsang of Bloomberg.  Recovery in energy shares may signal an end to the demise of the MSCI World Index, which has declined by 42% since October 2007, and the first global contraction in six decades.  The news sent the Energy Select Sector Energy Fund (XLE) up 0.2% in morning trading.

Overall all three major U.S. indexes are up in morning trading.  The Dow Jones Industrial Average and the Nasdaq both added 0.3%, while the S&P 500 is up about 0.2%.

For more stories on energy, visit our energy category.

Kevin Grewal contributed to this article.

Despite some negative news, U.S. stocks and exchange traded funds (ETFs) climbed into positive territory this morning as investors became more hopeful that the economy has already hit bottom and is on its way up.

Chrysler is going to file for bankruptcy after talks with a small group of creditors fell apart one day before a government deadline for the automaker to form a restructuring plan, report Stephen Manning and Tom Krisher for the Associated Press. But that doesn’t mean they’re going to shutdown. President Barack Obama is expected to discuss the country’s auto sector today.

The Commerce Department reported that consumer spending declined more than expected putting a halt on a two-month growth spurt. It declined by 0.2%, exceeding the 0.1% decline economists estimated, after posting gains of 0.2% in the previous month. Additionally, U.S. incomes dropped by 0.3%, yet disposable income remained unchanged, indicating that Americans are paying less in taxes, states Bob Willis of Bloomberg.

On a positive note, inflation talks seem to have cooled off. The price gauge linked to spending patterns rose 0.6% from March 2008, compared with 0.9% for the year ended in February and the Fed’s preferred gauge of prices, which excludes food and fuel, climbed 0.2% in March and was up 1.8% from the same time last year.

More positive news hit the economy on the employment note. The Labor Department said that initial jobless claims fell last week by 14,000 to 631,000. This is great news, considering that the total number of continuing jobless claims is at record levels. This means that it is hard for unemployed job seekers to obtain gainful employment.

• Dow Chemical (DOW) posted a 97% drop in first quarter profit, but blew Wall Street’s expectations out of the water. The company reported earnings of $0.12/share as expected to analyst’s expectations of a loss of $0.21/share. Dow’s chairman and CEO, Andrew Liveris states that the company was able to turn a profit as a result of rapidly cutting costs and tightly managing operations.
• Despite being influenced by the global recession, Proctor & Gamble (PG) was able to beat earnings expectations as well. The maker of Tide detergent and Gillette razors reported earnings of $0.84/share, well ahead of the $0.81/share that analysts forecasted.
• To keep this ball rolling, gold miner Newmont Mining Corporation (NEM) earnings topped forecasts, too. Newmont Mining reported earnings of $0.44/share ahead of the $0.41/share Wall Street expected. Two things that worked in the gold miner’s favor were lower commodity prices and lower-than-expected Australian dollar exchange rates.

On a sour note, Exxon Mobil (XOM) posted a 58% drop in profits and missed Wall Street’s expectations. Declining global demand for crude oil resulted in profits of $0.92/share, short of the $0.95/share analysts expected. This sends shares of the stock down about 2%, however, didn’t have much of an impact on the energy sector overall. The Energy Select Sector SPDR (XLE), was actually up about 0.5% in intraday trading, despite being down about 2% for the year. XOM constitutes 23.2 % of the fund’s assets.

Bank of America (BAC) shareholders voted Ken Lewis out as chairman of the board.  He still remains CEO of the company and now has to prove his worth to the board.

The Dow Jones Industrial Average was up about 1.2%, the S&P 500 climbed 1.4% and the Nasdaq jumped nearly 2.1% in morning trading.

Kevin Grewal contributed to this article.

Refiners are the most ignored sub-sector within the energy sector. It seems like the broader market has also ignored the refiners, as they have not participated in the energy rally that started on March 3. Bullish Bankers on Seeking Alpha say that many investors are told to avoid the refiner area of the energy sector by advisors because of their business model, which is tough to understand on a macro-economic level.

The refiners are the sub-sector of the S&P Energy Composite which go undetected. While pure-play refiners only make up roughly 3.5% of the entire composite, if you include other companies’ refining operations, the number is closer to approximately 20% of the composites revenues depending on the quarter.

Day-to-day market moves should be watched, as this sub-sector can be volatile. Names that stand out in the refining industry include: Valero, Sunoco (SUN), Hess (HES), Tesoro (TES) and Western Refining (WNR).

Refiners have been cutting back on fuel production several months ago, and have yet to step it up despite the looming summer, says Brian Baskin for Dow Jones Newswires. The warm season usually brings peak gasoline demand, but unwanted oil is sitting in storage. The price of oil is just around $50 per barrel today.

• Oil Services HOLDRs (OIH): up 4.4% year-to-date

• Energy Select Sector SPDR (XLE): down 5.3% year-to-date; Hess 2.10%; Valero 1.43%

The oil company is bucking the trend so many other companies are following. Instead of slicing and dicing, they’re showing their strength by stepping up their investments over the next five years. Jad Mouawad for The New York Times reports that the company is not swayed by a collapse in oil prices or the most severe global financial crisis since the 1930s.

The giant plans to spend as much as $150 billion through 2014. Exxon already earned $45 billion in 2008, gave back $40 billion to its shareholders, invested $26 billion around the world and managed to find more oil than it produced.

Russell Gold for The Wall Street Journal reports that Exxon played conservative with investment in years prior while capitalizing on high oil prices, giving the company the room to boost spending on energy exploration and production by 11% to $29 billion this year, even as many of its rivals are cutting costs.

But the only concession to the depressed economic outlook that Exxon has made is to cut its share buybacks to $7 billion this quarter, down from $8 billion in each of the previous four. No major adjustments have been made to the business strategy.

• Energy Select Sector Energy Fund (XLE): down 19.7% year-to-date; down 9% for one week; XOM is 22.8%

Meanwhile, China is rumored to be considering buying crude oil as part of its strategy to diversify holdings from U.S. Treasuries. This will be used as a hedge against the risk of U.S. Treasury prices dropping and dollar depreciation in the long run, since the Obama administration is issuing government bonds worth trillions to finance economic stimulus measures, reports Mandar Nikmar for Economic Times.

China has been building a national stockpile of oil since 2004, and is planning to stock 100 billion barrrels by next year. Real purchases, rather than speculation, is driving the price of oil up overseas.

Investors have a cornucopia of ETFs to choose from with 843 exchange-traded products currently available, writes Ron Rowland for Seeking Alpha. There are some oddballs that have trading sessions with zero volume and high bid/ask spreads. But there is also a select group known as the “ETF Billion Dollar Club” that has risen above the crowd in providing more than $1 billion per day in trades.

The average daily value traded (ADVT) is a good indicator for liquidity. It is the volume multiplied by price, and is sometimes referred to as $ Volume. Higher liquidity means there will most likely be someone out there willing to take the other side of a trade.

There are 17 members in this exclusive club as of February, 2009:

1. SPDR S&P 500 (SPY): ADVT of $30,767,683,584
2. PowerShares QQQ (QQQQ): $5,251,502,080
3. ProShares UltraShort Financials (SKF): $4,627,046,400
4. ProShares UltraShort S&P500 (SDS): $4,580,779,008
5. iShares Russell 2000 (IWM): $3,093,236,480
6. DIAMONDS Trust (DIA): $2,625,997,824
7. SPDR Gold Trust (GLD): $2,470,299,648
8. SPDR Select Sector Financial (XLF): $2,082,540,544
9. ProShares Ultra S&P 500 (SSO): $1,905,811,200
10. SPDR Select Sector Energy (XLE): $1,795,240,832
11. iShares MSCI Emerging Markets (EEM): $1,746,615,296
12. ProShares UltraShort Real Estate (SRS): $1,577,850,496
13. ProShares UltraShort QQQ (QID): $1,458,607,744
14. iShares Dow Jones U.S. Real Estate (IYR): $1,244,349,184
15. iShares MSCI EAFE (EFA): $1,222,589,568
16. Direxion Financial Bear 3x Shares (FAZ): $1,221,666,944
17. United States Oil Fund (USO): $1,034,414,528