Elsewhere, the Euro currency continued its recent slide versus the U.S. Dollar last week with the exception of a small bounce last Friday, as FXE (CurrencyShares Euro) closed at $123.55 after spending the previous week in the $125-126 range. It seems clear that the Euro weakness (and thus U.S. Dollar strength), has weighed heavily on commodity prices such as Crude Oil which continues to toil at recent lows, and even Gold saw a huge pop last Friday, spiking more than 6% from it’s lows during the week.
Despite the negative looking tape in equities, net creation activity across ETFs still was heavily tilted toward equities. SPY reeled in about $1.5 billion to lead the pack, and XLE (SPDR Energy) took in more than $1 billion in a week of huge flows for the sector ETF, accounting for more than 16% of the assets outstanding in the fund.
With top weightings consisting of XOM (18.85%), CVX (14.77%), and SLB (7.08%), it is possible that institutional participants are using the recent steep drop in crude oil prices combined with broad market (and energy sector) weakness, to look for value in large cap oil related equities. Additionally, a number of Vanguard core and value tilted products saw significant inflows throughout last week, including VB (Vanguard Small Cap), VO (Vanguard Mid Cap), VTV (Vanguard Value), VBK (Vanguard Small Cap Growth), VUG (Vanguard Growth), and VBR (Vanguard Small Cap Value), which reeled in more than $3 billion collectively.
From the outflows side of the equation, we saw Techs and Financials (two higher beta sectors obviously) lose assets as QQQ (PowerShares QQQ) saw about $800 million leave the fund and XLF (SPDR Financials) gave back $130 million. REITs, namely IYR (iShares DJ U.S. Real Esate) and XLI (SPDR Industrials) were also among the net losers last week in terms of asset flows, as these two funds lost nearly $300 million collectively via redemptions.
Going into the first full trading week in the month of June, a few items will be squarely focused on our radar in the early part of the week, namely the U.S. Treasury Bond Market, Gold Prices, the VIX, and the S&P 500 in relation to its 200 day moving average. We seem to be at an important crossroads in terms of the market establishing any consistency in near term direction, and with more institutional market participants expected to be in their offices back from the abbreviated holiday week last week, we should have a true gauge of how the battle between the bulls and bears will play out in coming days.
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