U.S. stock exchange traded funds (ETFs) were sharply lower early Tuesday in the wake of concerns about companies’ earnings and Japan’s upgrade of the severity of its nuclear crisis.
- Japan’s nuclear safety agency raised the severity of the Fukushima Dai-ichi nuclear plant incident by two notches to level 7, the highest on the scale and the same rating as the Chernobyl incident. The move, along with continuing earthquake aftershocks which have interfered with recovery work, sent ripples of unease through markets. “News that the Japanese government has escalated the rating of the Fukushima nuclear threat to 7 injected a somber tone into the markets,” said Jane Foley, an analyst at Rabobank International. The iShares MSCI Japan Index ETF (NYSEArca: EWJ) is flat in early trading.
- U.S. companies sold fewer products overseas in February but the trade deficit still narrowed because of a big decline in oil imports. The trade deficit fell 2.6 percent to $45.8 billion in February, the Commerce Department reported Tuesday. Exports, which had hit an all-time high in January, edged down 1.4 percent to $165.1 billion. Sales of U.S. autos, industrial machinery and food products all dropped. Imports fell 1.7 percent to $210.9 billion, reflecting a lower foreign oil bill and fewer imports of autos and computers. Trade is expected to be essentially neutral in terms of its impact on U.S. economic growth this year. Export gains will help blunt the impact of higher imports. Growth slows when imports outpace exports because more jobs go to foreign workers. The Market Vectors Agribusiness ETF (NYSEArca: MOO) is down so far today.
- U.S. import prices rose more than expected in March to post their largest increase in more than 18 months, driven by a surge in imported petroleum costs and higher food prices, a government report showed on Tuesday. Overall import prices jumped 2.7%, a sixth straight month of gains, the Labor Department said. The increase outstripped economists’ forecasts for a 2.2% increase and followed a 1.4% rise in February. The monthly rise in import prices reflected a 10.5% surge in petroleum, the biggest increase since June 2009, which followed a rise of 4% in February. Imported food prices increased 4.2%, the largest advance since July 1994, after rising 0.7% in February. The ProShares UltraShort Basic Materials ETF (NYSEArca: SMN) rose approx. 2.5% early Tuesday.
- A survey of small businesses’ economic conditions fell to the lowest level in five months during March as confidence deteriorated, according to a survey released Tuesday. The National Federation of Independent Business index of small business optimism fell to 91.9 in March, down from 94.5 in February. “This is disappointing, but we hope it is a one-time move in response to the jump in oil prices, in parallel with the drop in consumer confidence,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics. The “soft components” of the survey — notably those that expect the economy to improve, which slumped 14 points and represented roughly half of the decline — fell, while the “hard components” — job creation, job openings, capital spending plans and inventory plans — rose two points.
Gregory A. Clay contributed to this article.
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