Midday Market Update: Real Estate Fails to Ignite Spark | ETF Trends

U.S. stocks and exchange traded funds (ETFs) continue to oscillate after encouraging real estate news and anticipation of the Federal Reserve’s two-day monetary policy meeting.

The National Association of Realtors said that May sales of existing homes rose by 2.4%. This is the third monthly increase this year, but a bit short of the 2.8% increase expected by analysts. This is promising news, but investors are still wary of a complete housing recovery because of the plunge in prices of existing homes; prices dropped a whopping 16.8% to a median price of $173,000. The news sent the iShares Dow Jones U.S. Real Estate (IYR) up nearly 0.5% in morning trading.

Further uncertainty of the fate of the markets has been brought on by today’s start of a two-day monetary policy meeting held by the Federal Reserve. The Fed is expected to keep key interest rates at or near zero and contemplate over whether or not to raise rates in the near future to curb inflation.

Another cause of caution has been stirred up by the Treasury Department’s auction of $60 billion in two-year notes. In order for the government to continue financing its bailout and stimulus programs, demand for Treasury notes needs to stay strong and yields cannot skyrocket. The iShares Barclays 1-3 Yr Treasury Bd (SHY) is up about 0.1% in morning trading.

On a different note, the aerospace and defense sector took a blow as Boeing (BA) announced that the initial test flight of its much-anticipated 787 jetliner will be delayed, citing a need to reinforce part of the aircraft. As a result, Boeing said that it will not announce when it expects the test flight to take place or for deliveries of the plane to take place for several weeks to come. The news sent the PowerShares Aerospace & Defense (PPA) down about 2% in morning trading; BA is 7.3%.

The volatility of crude oil continues to linger around the industry. Continued uncertainty of the global economy and demand for black gold were offset by the weak U.S. dollar, which drew some speculators back to commodities, but not by much. Crude continued to slide and fell below $67/barrel on the New York Mercantile Exchange. Despite this decline, the US Oil Fund (USO) gained nearly 0.2% in intraday trading.

As many consumers think twice about spending an extra dollar, thrifty measures have lead to many home-cooked meals and families eating dinner at the dinner table as opposed to being waited on at a restaurant. This trend has been beneficial for grocers such as Kroger Co. (KR), which posted a gain in first-quarter profits of 12.7%, or $0.66/share. The Cincinnati-based company beat Wall Street’s expectations and affirmed its full-year earnings guidance of $2 to $2.05/share. Despite the stellar performance, the Retail HOLDRs (RTH) was down 1% in morning trading; KR is 4.3%.

By mid-morning, all three major U.S. indexes were trading in negative territory. The Dow Jones Industrial Average is down nearly 0.5%, the S&P 500 dropped nearly 0.4% and the Nasdaq declined about 0.6%.

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

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.