ETF Trends
ETF Trends

U.S. stocks and exchange traded funds (ETFs) are in the red in morning trading on unexpected declines in retail sales and producer prices, putting a halt in hopes that the economy has bottomed out.

The Commerce Department reported that retail sales declined 1.1% in March, making it the biggest decline in the last three months and a far cry from the 0.3% increase that analysts had forecast. The decline was lead by a slump in auto sales, restaurant, furniture and clothing stores and electronics sales, states the Martin Crutsinger of the Associated Press.

On a positive note, the Labor Department reported that wholesale prices plunged a whopping 1.2% in March as a result of a sharp decline in the cost of gasoline, other energy products and food. This snapped a two-month stretch of price gains, which indicates that the recession is keeping inflation under control. Additionally, business inventories fell for a sixth straight month, posting a 1.3% decline and right on target with analysts’ expectations.

The retail industry is crucial to the overall state of the nation’s economy and is generally a great indicator of consumer confidence. The aforementioned decline in retail sales sent the SPDR S&P Retail (XRT) down about 1.3% in intraday trading, despite being up 26% year to date.

On a separate note, President Barack Obama spoke about the economy this morning in an effort to get control over the nation’s economic debate. He warned Americans that we’re not out of the woods, but made the case for his own agenda, reports Liz Sidoti for the Associated Press. His speech aimed to keep spirits up, while seeking to temper naively rosy expectations.

On more positive news, the Energy Information Administration reported that gasoline prices are expected to stay relatively low this summer.  The main reason behind this is basic economic equilibrium, with refinery production expected to increase by 240,000 barrels per day compared to last summer and the demand for the gasoline to remain relatively low because of the recession, states H. Josef Hebert of the Associated Press.

An ETF that will be influenced by gasoline prices is United States Gasoline (UGA), which is up about 1% in intraday trading and 27.2% year to date.

There is more good news out there for taxpayers.  With a better than expected earnings report and a 54% increase in stock price, Goldman Sachs (GS) announced that it plans on returning the TARP money it borrowed.  This repayment could pressure other banks to take measures to repay borrowed funds as well and the government may recoup some of the money it lent, states Christine Harper of Bloomberg.  This will most definitely impact the iShares Dow Jones US Broker-Dealer ETF (IAI), which is up 16.5% year-to-date; GS is 10.9%.

Last, but not least, more sunshine has hovered over Wall Street with better than expected earnings being reported by Johnson & Johnson (JNJ).  The diversified health care company reported earnings of $1.26/share, beating analysts’ expectations of $1.22/share and sending the company’s stock price up about 2% in morning trading.  Additionally, Goldman Sachs beat expectations by reporting a first quarter profit of $3.39/share, more than double that of the $1.64/share forecast by analysts.

Hopefully the trend of more good news will extend when CSX Corporation (CSX) and Intel (INTC) report earnings after the bell and Citicorp (C), JP Morgan (JPM) and General Electric (GE) release earnings reports later in the week.

All three major indexes, the Dow Jones Industrial Average, the S&P 500 and the Nasdaq were down about 1% in morning trading.

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.