The major index exchange traded funds (ETFs) closed moderately lower on Tuesday as investors expressed concern about future earnings growth and commodity prices dropped.
- U.S. factory orders surged in March, posting a fifth straight monthly increase that showed a healthy manufacturing sector well placed to support economic recovery. The Commerce Department said on Tuesday new orders for manufactured goods rose 3 percent to a seasonally adjusted $463 billion, well above Wall Street economists’ forecasts for a 1.9 percent pickup. In addition, February orders that had been reported as dropping by 0.1 percent were sharply revised to instead show a 0.7 percent increase. A cheaper U.S. dollar has helped export industries and there are signs that producers are boosting investment in plants and equipment to benefit from it. Orders for costly durable goods, items designed to last three years or more, were up 2.9 percent in March, the department said, an upward revision from a 2.5 percent gain it had earlier reported. Ian Lyngen, senior government bond strategist at CRT Capital Group in Stamford, Connecticut, called it “a solid report with lingering weakness from early in the first quarter.” The Industrial Select Sector SPDR (NYSEArca: XLI) closed flat on Tuesday.
- The dollar was mixed Tuesday as investors continued to weigh the impact of Osama bin Laden’s death on the world economy. The U.S. dollar rose against the Euro and pound, but fell against the yen and hit a record low against the Swiss franc. “There is some fear of retaliation attacks after the death of Osama Bin Laden,” said Camilla Sutton, currency strategist at Scotia Capital in Toronto. “There is some risk aversion going on.” Investors consider the dollar, yen and Swiss franc to be safe assets and they tend to rise during times of global turmoil. The dollar has fallen over the past few weeks as investors expected the Federal Reserve would keep interest rates low. Central banks overseas are raising interest rates. Higher rates tend to make currencies more attractive to investors seeking higher yields. The PowerShares DB Dollar U.S. Bullish Index ETF (NYSEArca: UUP) ended flat today.
- Treasury prices increased for a fourth day Tuesday, pushing 10-year yields to their lowest level since mid-March, continuing a trend as investors reconsider the outlook for U.S. economic growth. Yields on 1-year securities fell to a record low. “Investors are buying on the expectations that as the week progresses, the economic numbers won’t be as strong as originally thought,” said Kevin Giddis, president of fixed-income capital markets at Morgan Keegan. Analysts also noted that investors positioned for bond yields to rise this year — shorting the market — have continued to reverse those positions, pushing yields down. For months, bonds have tended to weaken ahead of major economic releases on expectations that the data would come in stronger than anticipated, said Jim Caron, global head of interest-rate strategy at Morgan Stanley. That may change in the next few weeks as the market sees the first major data points for the second quarter. The iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT) closed moderately higher on Tuesday.
Gregory A. Clay contributed to this article.
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