Exchange traded funds (ETFs) started out in negative territory on Thursday after the government reported an unexpected rise in weekly jobless claims and a spike in producer prices in March.
- U.S. wholesale prices rose sharply in March for the sixth consecutive month, spurred once again by higher gasoline costs, although food costs fell, the Labor Department said Thursday. The government’s producer-price index climbed a seasonally adjusted 0.7% in March, following a 1.6% gain in February and a 0.8% increase in January. The core rate, which excludes the volatile food and energy categories, rose 0.3% in March. Higher prices for light trucks accounted for a large chunk of the increase. Investors and the Federal Reserve usually view the core index as a better gauge of inflationary pressure because it excludes food and energy, prices of which often fluctuate. Yet so far, most of the increases in wholesale costs have not been passed on to consumers in the form of higher prices. Consumer prices have risen a slower 2.1% in the 12 months ended in February. Many companies have found ways to cut their costs, or they are taking lower profits to prevent the loss of market share. The Consumer Discrete Select SPDR ETF (NYSEArca: XLY) is down early Thursday.
- On the surface, the foreclosure crisis seems to be easing. The number of foreclosure notices filed during the first three months of 2011 fell 27% compared with the first quarter of 2010, according to a report from RealtyTrac released Thursday. Only 681,000 properties got hit with some type of filing — a notice of default, a scheduled auction or a foreclosure sale — during the quarter, one for every 191 households. There were 215,046 borrowers who lost their homes, down 17% year-over-year. That improvement was in sharp contrast to other recent housing market metrics, with sales of existing and new homes very weak and home prices still sliding. “The nation’s housing market continued to languish in the first quarter, even as foreclosure activity fell to a three-year low,” said James Saccacio, RealtyTrac’s CEO. The explanation for this contradiction is that the foreclosure improvement has been artificial, fueled by banks reacting to paperwork processing issues — the infamous “robo-signing” scandal — by cutting back on filings until they can clean up their procedures. The iShares Dow Jones U.S. Real Estate ETF (NYSEArca: IYR) is up slightly today.
- While earnings remain in the spotlight, the threat of more European sovereign-debt troubles weighed is weighing on European markets, said Joel Kruger, currency strategist at Forex Capital Markets. “There’s talk about default in Ireland and restructuring in Greece and EMU peripheral spreads have widened out to record levels,” he said. The cost of insuring Greece’s government debt against default hit a record level Thursday, after German Finance Minister Wolfgang Schaeuble reportedly told newspaper Die Welt that Greece may need to take “further measures” if a June audit by the European Commission and the European Central Bank shows the nation’s debt burden isn’t sustainable. The ProShares UltraShort MSCI Europe ETF (NYSEArca: EPV) jumped 1% so far on Thursday.
Gregory A. Clay contributed to this article.
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