Fed Disappoints—Major Market ETFs Slip And Slide; Punk Economics Video Simplifies Understanding Of Economic Connections

[Chart courtesy of MarketWatch.com]

Major Market ETFs extended losses for the fourth day, although only slighty, after the latest Federal Reserve minutes showed few members arguing in favor of further assets purchase despite US unemployment rate remaining elevated. As the chart above shows, the QE junkies were disappointed as the markets stumbled.

Despite sinking 118 points earlier, the Dow Jones Industrial Average (DJIA) pared losses to close only 48.59 points lower, after a Commerce Department report showed US trade deficit narrowed to $48.7 billion in May due to higher exports to China and Europe from $50.1 billion in the prior month.

The S&P 500 Index (SPX) remained flat, shaving only 0.027 points after the financial index climbed 0.8 percent following four consecutive down sessions. Energy however, was the day’s biggest percentage gainer among the index’s 10 business sectors.

Treasury yields approached record lows after the Fed’s June 19-20 FOMC minutes showed another round of stimulus is unlikely to come soon unless the economy shows further signs of slowing down. Yield on the benchmark 10-year notes dropped one basis point to 1.51 while yield on 30-year bond changed little in late afternoon trading, New York time.

ETFs in the news:

As US stocks witnessed another choppy session due to lack of more easing support from the Federal Reserve, commodities ended the day broadly higher with energy products surging. Natural gas vaulted 4 percent while WTI Crude finished 2.7 percent higher.

The United States Natural Gas Fund (UNG) added 3.58 percent for the day ahead of the EIA natural gas inventories report tomorrow. The average gas stockpile has been rising at 56 billion cubic feet every week in June compared 65 billion bcf over the same period last week. As utilities and truck operators increasing switch to natgas due to lower prices, demand has been growing steadily. Investors expect significant natgas price uptick before winter.

The Invesco PowerShares Global Gold and Precious Metals Portfolio (PSAU) were among the biggest percentage decliners within the non-leveraged fund segment, shedding 2.57 percent for the day as gold prices tumbled after the Fed failed to offer any hint of further monetary stimulus measures. As August gold futures trimmed $9.30 an ounce, gold and other precious metal miners retreated over lower inflation worries.

Despite Europe being fairly quiet today, as far as news is concerned, you never know when the next shoe will drop. As I have repeatedly said, globally speaking, we are all connected at the hip. This is well explained in the following video titled Punk Economics. Enjoy!


Disclosure: No holdings

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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