ETF Trends
ETF Trends

The U.S. stock market and exchange traded funds (ETFs) bounced back this morning ahead of an announcement today by the Federal Reserve.

Most believe that the Fed will leave its bank lending rate at zero to entice lending and further stabilize the financial system.

The U.S. trade deficit rose 4% to $27 billion in June, which reflected an increase in imports of 2.3%. It was the first increase in nearly a year, indicating that the demand in the United States is starting to recover.  Exports increased by 2%, indicating that global demand is increasing.

In the real estate arena, U.S. mortgage applications dropped last week, reflecting a drop in demand for home refinancing loans as interest rates soared to their highest levels since June.  Borrowing costs on a 30-year fixed mortgage jumped to 5.38%, up 0.21% from the previous week, as the seasonally adjusted index of refinancing applications decreased 7.2%.

Investors are turning more bearish on Treasuries and the dollar on speculation their appeal will diminish as the first global recession since World War II is easing.  According to a survey conducted by Bloomberg, confidence in the global economy rose to 58.1 from 39.1 in July, indicating that the economy is expected to grow. This could lead to an increase in Treasury yields and a weaker dollar, states Yie Xe of Bloomberg.  The news sent the PowerShares DB U.S. Dollar Index Bullish (UUP) down nearly 0.6% in morning trading.

In the earnings world:

  • Retailer Macy’s (M) reported a better-than-expected second-quarter profit of $0.20/share as compared to the $0.15/share Wall Street expected.  Revenues of the company were down 10% and same-store sales dropped 9.5% from a year ago and the performance was driven by aggressive cost-cutting measures.
  • In Switzerland, the world’s largest food maker, Nestle, reported its first profit decline in six years as net income declined 2.8%.
  • ING Groep (ING) reported a drop in profits of 96%, as the largest Dutch-based financial services failed to meet analysts’ expectations.

Overall all three major U.S. indexes gained ground with the Nasdaq leading the way at 1.6%, followed by the Dow Jones Industrial Average gaining 1.3% and the S&P 500 adding 1.2%.

For more stories on currencies, visit our currency 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.