Economic Concerns Hold Back Stock ETFs | ETF Trends

In the lightest volume session of the year, equity exchange traded funds (ETFs) ended flat on Monday as tepid earnings reports weighed on the major indexes. Investors were also worried about higher commodity costs squeezing profit margins in coming quarters.

  • Treasury prices rose Monday, pushing yields down, as traders positioned ahead of Federal Reserve Chairman Ben Bernanke’s inaugural news conference following the central bank’s interest-rate decision. “Bernanke’s post-decision press conference adds enough uncertainty to the process of communicating the [Federal Open Market Committee’s] message that it’s a clear risk event,” said strategists at CRT Capital Group. Trading during Asian and European market hours was light, with many major markets still closed for the holidays. Analysts at CRT Capital Group said earlier that Treasury-bond volume was 39% of the 10-day average. Analysts at RBS Securities noted that the benchmark 10-year note’s yield sits near the middle of a well-established range between 3.25% and 3.55%, which has provided good technical support and resistance. “A break and close in 10-year yields outside of this range will probably signal the beginnings of a new trend for yields,” said RBS strategists Bill O’Donnell and John Briggs in a note. The iShares Barclays 20+ Year Treasury Bond ETF (NYSEArca: TLT) closed slightly higher on Monday.
  • Oil was flat Monday, as the dollar pulled back from lows set earlier in the day and investors awaited this week’s Fed meeting. Oil is priced in dollars, so it tends to fall as the dollar strengthens and makes crude more expensive for investors holding foreign money. While the dollar was down slightly versus other major currencies, it bounced back from earlier lows. The dollar has been weak because investors think the Federal Reserve will continue to keep interest rates near zero when it meets Tuesday and Wednesday. Other central banks have been raising interest rates out of concerns about inflation. Rock-bottom U.S. interest rates make the dollar less attractive to investors. Gas pump prices continued to climb for the 34th straight day, to a national average of more than $3.86 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular has increased 32 cents since March 22. The average price is now a dollar more per gallon than a year ago. The SPDR S&P Oil & Gas Exploration ETF (NYSEArca: XOP) closed flat today.
  • Sales of new U.S. homes rose in March and the number of new properties on the market was its lowest since the 1960s, but further gains will be hampered by the broader property glut. Single-family home sales rose 11.1 percent to a seasonally adjusted annual rate of 300,000, the Commerce Department said on Monday, up from a near record low pace of 270,000 in February when harsh winter weather hit the economy. Analysts had expected a 280,000-unit rate in March. The market for new homes is being squeezed by competition from previously owned homes and a deluge of foreclosed properties, even though inventories of new properties in March fell to 183,000 units — the lowest since August 1967. Builders, hurt by the weak market, are holding back on new home construction. The iShares Dow Jones U.S. Real Estate ETF (NYSEArca: IYR) ended Monday moderately higher.

Gregory A. Clay 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.