ETF Trends
ETF Trends

Stock exchange traded funds (ETFs) were down on Monday based on concerns related to the long-term debt outlook of the U.S.

  • Standard & Poor’s cut its credit outlook on the U.S. while volatility-linked ETFs rose. The iPath S&P 500 VIX Short-Term Futures ETN (NYSEArca: VXX) gained 4%.
  • Economists say the U.S. economy is gaining strength despite political unrest in North Africa and the Middle East and last month’s devastating earthquake and tsunami in Japan. A survey from the National Association for Business Economics finds that economists are hopeful that the broader economy is substantially improving, with rising employment reported for the fifth quarter in a row. The survey found that “companies appear to be positioning themselves for a firming economic environment,” said Shawn DuBravac, an economist with the Consumer Electronics Association, who analyzed the findings. The outlook for employment rose slightly, reaching a 12-year high. No firms reported significant layoffs, with the only reductions coming from already planned cuts. The SPDR S&P Retail ETF (NYSEArca: XRT) is down almost 2% on Monday.
  • European markets pushed further into the red Monday, pressured by banking stocks on rekindled sovereign-debt worries. A Greek newspaper reported that the government had asked the International Monetary Fund and the European Union to start debt-restructuring talks, which was reportedly denied by a finance-ministry official. Also, over the weekend, a Euro-skeptic party opposed to European bailouts — the True Finns — made a strong showing in Finland’s elections Sunday. If the party becomes part of the government, the concern is that it will hamper the pending Portuguese bailout. The ProShares UltraShort MSCI Europe ETF (NYSEArca: EPV) surged almost 4.5% so far today.
  • Chinese stocks posted modest gains Monday as investors shrugged off a well-anticipated increase in banks’ reserve requirement ratio over the weekend, while Japanese shares were pressured by a strengthened yen and caution ahead of corporate results. “The hike in banks’ reserve requirement ratio has been well-flagged, and isn’t having a great impact on the market,” said Hong Yuan Securities analyst Tang Yonggang in Shanghai. Prakash Sakpal, a Singapore-based economist at ING Financial Markets Research, said he expected the Peoples Bank of China to raise its policy interest rates once and the RRR twice more during the current quarter, and then to end its tightening cycle. The iShares MSCI Japan Index ETF (NYSEArca: EWJ) dropped 1% early today.

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.