Equity ETFs Sink As Hope For Further Stimulus Fades; Europe Ends Lower Over Weak Data

[Chart courtesy of MarketWatch.com]

US equity ETFs retreated Thursday as a string of positive economic data dimmed hopes of further monetary stimulus ahead of Friday’s speech by Chairman Ben Bernanke.

A Labor Department report showed number of Americans filing for first-time unemployment benefits for the week ending August 25 remained flat at 374,000, slightly higher than an estimated 370,000 by analysts polled by Briefing.com.

A separate Commerce Department report showed the core PCE inflation number, a gauge of prices linked to consumer spending, gained only 1.3 percent in the 12 months ended in July against the Fed’s target of two percent, the least since October 2009, indicating there’s room for further expansion.

The Dow Jones Industrial Average (DJIA) shed 107 points, with the breadth within the 30-stock blue-chip index turning overwhelmingly negative as decliners outran gainers 28-to-2.

The S&P 500 Index (SPX) fell 11 points to close below the 1400 mark for the first time in four weeks.

The yield on the benchmark 10-year Treasury notes fell three basis points to 1.62 percent while 30-year Treasury bond yields traded two basis points lower at 2.75 percent as demand for US safe haven assets surged following reports Prime Minister Mariano Rajoy has postponed a decision to request for Spanish bailout, bringing differences over managing the credit-crisis to the front.

The US dollar continued to strengthen across the board as Europe returned to focus Thursday. The dollar index, a gauge of the greenback’s strength against a basket of six leading currencies, rose to 81.704 from 81.551 in late Wednesday North American trade.

Meanwhile, weak macroeconomic data sent Europe on a downhill journey with miners, car makers and banks leading the decliners as investors braced for Friday’s Bernanke Speech at Jackson Hole.

His upcoming speech is what the investment world is focused on and nothing else seems to matter. We will find out tomorrow morning whether Bernanke will please or disappoint Wall Street, or whether he chooses the neutral route with the usual jawboning that they need more data but are ready to act should the need arise.

I will post the latest StatSheet containing TTI positions and momentum numbers within the next hour or so.

About Ulli Niemann

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