U.S. equities markets and stock exchange traded funds edged lower on the last day of the Month and trimmed gains for May as traders gauged the impact of a stronger-than-expected economic reports and a potential Federal Reserve interest rate hike on an improving economy.
Over May, the Dow Jones Industrial Average was down 0.6%, the Nasdaq Composite increased 2.7% and the S&P 500 added 0.8%.
The best performing non-leveraged exchange traded products for the past month include the Global X Nigeria Index ETF (NYSArca: NGE) up 19.8%, iPath Bloomberg Lead Subindex Total Return ETN (NYSEArca: LD) up 17.4% and ELEMENTS Dogs of the Dow Linked to the Dow Jones High Yield Select 10 Total Return Index ETN (NYSEArca: DOD) up 15.4%.
Nigerian equities strengthened after the central bank said it would adopt a flexible exchange rate policy, ending currency controls that fettered the equity market. The Nigerian naira currency was overvalued due to a pegged regime, which weighed on growth and investment. Foreign investors saw a devaluation as inevitable and previously kept to the sidelines or have been selling shares.
Related: Nigeria ETF Surging on Central Bank Forex Relief
Industrial metals have all rebounded in recent months as traders bet on improving global economic conditions would bolster demand for the base metals after prices hit multi-year lows. Supporting the recent gains in base metal prices, markets saw improving data from China, the world’s largest consumer of industrial metals.
Related: 19 ETFs to Track the Turn in Industrial Metals
DOD tracks a so-called Dogs of the Dow investment strategy. Specifically, the underlying index is composed of ten stocks in the Dow Jones Industrial Average with the highest indicated annual dividend yield and is reweighted and reconstituted each December. Dividend paying stocks continue to shine as investors turn to the value play and look to yield generating assets in a low-yield environment.
Related: Dividend Growth ETFs Grow to Top of the List
On the other end, the worst non-leveraged ETPs of the past month include PowerShares DB Crude Oil Long ETN (NYSEArca: OLO) down 19.6%, VanEck Vectors Steel ETF (NYSEArca: SLX) down 15.1% and iShares MSCI Turkey ETF (NYSEArca: TUR) down 13.5%.
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The month of May was plagued by a sideways market with positive momentum quickly being counteracted by negative data. Poor economic news and falling oil prices dragged on equities at the start of the month.
An improving U.S. employment situation, potentially higher wage growth and rising inflationary outlook helped support a rebound. Moreover, stronger-than-expected retail sales and improving consumer sentiment also bolstered stocks.
Nevertheless, trading remained defensive as conservative investors stuck to Treasuries and other hedge plays.
In mid-May, the Federal Open Meeting Committee minutes revealed a hawkish stance where policy makers pointed to rising economic strength as the main factor for an increased chance of a June rate hike.
U.S. equities continued to strengthen toward the end of May on improving economic data, such as rising home prices and a strengthening housing market.
Markets, though, ended the month on a sour note as traders refocused on Federal Chair Janet Yellen’s remarks on a possibile June rate hike given the strength in the labor market.
For more information on how ETFs are doing, visit our ETF performance reports category.