The Federal Reserve’s decision to pump another $1 trillion into the U.S. economy has caused The Dow Jones Industrial Average to oscillate between positive and negative territory this morning and has had an impact on certain sectors and their exchange traded funds (ETFs).
Despite the release of weak oil inventory data from the U.S. Energy Information Administration, NYMEX crude oil futures have jumped about 5.5% to a little more than $50/barrel in intraday trading, hitting a high for 2009. United States Oil (USO), is up about 3.4% in intraday trading.
On a negative note, the Fed’s decision to purchase up mortgage debt will add to a flood of greenbacks and threatens to destroy the recent rally seen by the U.S. Dollar. The trade-weighted Dollar Index, which tracks the currency’s performance against the euro, yen, pound Canadian dollar, Swiss franc and Swedish krona tumbled 2.7%, its biggest one-day drop since 1971, states Ye Xie of Bloomberg. Additionally, trading patterns indicate that the dollar is poised to weaken and fall. PowerShares DB US Dollar Index Bearish (UDN), is up about 1.6% in intraday trading.
Some believe that the Fed’s decision to infiltrate the economy with even more dollars was based on the fact that the U.S. leading economic indicators index fell 0.4% in February. The good news is that the index fell less than analysts had expected, indicating that the downward momentum of the overall economy is slowing, states Shobhana Chandra of Bloomberg.
On a separate note, FedEx (FDX) has been hit hard by the global recession. The package delivery giant reported its first decline in sales revenues ever, a 75% drop in profits. It also gave a low quarterly outlook and is taking fresh action to cut costs, states Nick Carey of Reuters. One measure the company has taken is to suspend paying matching contributions to its 401(k) retirement plan for a minimum of one year and is implementing pay cuts for all salaried personnel. An ETF that is influenced by FedEx is the iShares Dow Jones Transportation Average Index Fund (IYT), down 26.7% year-to-date; FedEx is 9.2%.
In brighter news, first-time jobless claims fell more than expected last week, the Associated Press says. Continuing claims set a new record for the eighth consecutive week, and few economists expect the labor market to really improve anytime soon.
Kevin Grewal contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.