Stocks and exchange traded funds (ETFs) are vacillating between the positive and negative as the morning’s news emerges, including Supreme Court rulings, details from the G20 meeting and consumer spending results. The world leaders meeting in Toronto as part of the G20 summit have set a timetable for slashing deficits and curbing the growth of their debt. But not so fast – they’ve agreed to move cautiously so that any actions they take doesn’t stifle the economic recovery. The timetable was also presented as an expectation, not an order with a firm deadline.
Consumer spending rose more than forecast last month thanks to rising personal incomes, although retail ETFs didn’t necessarily reflect the improvement. Purchases rose 0.2% in May after a flat April. Retail ETFs, on the other hand, slipped about 5.5% for the month. They’re faring better this month, although they’re still generally down. [Consumer Discretionary ETFs: Outperformance in 2010?]
- SPDR S&P Retail (NYSEArca: XRT)
The Supreme Court struck down a portion of a 2002 law, which had created a board that polices the auditors of public companies on the grounds that it violated the separation of power between government branches. The ruling may ramp up pressure on Congress to revisit the Sarbanes-Oxley corporate reform act. While there are no direct implications for ETFs at this point, it could have an indirect one if changes to how corporations are audited are made.
Although consumer spending may be slightly up, yields on 10-year Treasury bonds tell a different story. Yields are now at 3.05%, indicating, at least in part, that Americans are worried about the economic recovery’s strength and the prospect of deflation. Some feel that yields could break 3%, depending on how this week’s slate of economic news goes. [What’s Next for Treasury ETFs?]
- iShares Barclays 7-10 Year Treasury (NYSEArca: IEF): currently yielding 3.29%
Find more stories about bond ETFs by visiting our bond fund page.
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.