It’s been a "V" kind of day for Wall Street and exchange traded funds (ETFs). The eagerly anticipated Federal Reserve report came today saying the government will leave interest rates at 5.25%, despite acknowledged turbulent market, credit and housing worries, reports Joe Bel Bruno for the Associated Press. The Fed did indicate its continued concern for inflation, but it didn’t appear to be bigger than before despite the recent credit problems.

Markets were shaky this morning, anticipating what the Fed might say. When the report was released, markets took a dive. However, once investors digested and accepted the Fed’s statements it rallied in response. As the market made up the initial losses, it created a V-shape for the Dow Jones and its ETF counterpart DIAMONDS Trust, Series 1 (DIA).

With all the problems in the housing market, iShares Dow Jones U.S. Home Construction (ITB) has been giving a notoriously negative performance, yet it turned up sharply today — up about 5.4%. Could the Fed’s report be partly responsible for this? It will be interesting to see if ITB holds the recent surge.


For full disclosure, some of Tom Lydon’s clients own DIA.

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