Markets Drift Lower On Indecision; Europe Rises On Tech And Banks

[Chart courtesy of MarketWatch.com]

US blue-chip indexes closed lower while tech-stocks jumped as investors remained undecided ahead of Federal Reserve chairman Ben Bernanke’s speech in a global banking symposium later this week.

The Dow Jones Industrial Average (DJIA) lost 0.3 percent after the blue-chip index’s breadth turned negative with 20 of the 30 stocks closing lower. The S&P 500 Index (SPX) closed fractionally lower while the tech-laden NASDAQ Composite (COMP) bucked the trend to close 0.1 percent higher after its biggest component Apple Inc (AAPL) added nearly 2 percent to hit a fresh all-time high after the smartphone maker aced rival Samsung in a patent lawsuit.

That was the excitement on the equity front as demand for safe-havens drove yields on 10-year Treasuries to near two-week lows on speculation US Fed chairman Bernanke will make a case for further asset purchases in his August 31 speech in Jackson Hole, Wyoming.

Investors, worried about the lack of consensus in Europe, will look forward to hints of intervention from the ECB as the central bank’s president Mario Draghi addresses the symposium Saturday in Wyoming.

Treasury 10-year benchmark yield fell four basis points to 1.65 percent while yield on 30-year bond dropped three basis points to 2.76 percent in late afternoon trading, after Chicago Fed President Charles Evans argued for further quantitative easing to stabilize growth.

The dollar rallied against the euro in the final hours as traders cut exposure ahead of potentially market-moving events later in the week. The US dollar index, an indicator of the greenback’s strength against a basket of six currencies, edged higher to 81.696 from 81.625 in late Friday trade.

Meanwhile Europe ended higher after tech and banking companies rallied, pushing the pan-European Stoxx Europe 600 index 0.5 percent higher on the day. Smartphone maker Nokia vaulted 7.7 percent in Helsinki after rival Samsung lost a patent dispute suit to Apple in a US court Friday.

Markets shook off earlier data from Germany as IFO Institute’s August business confidence index fell to102.3 from103.3 in the prior month, beating economists’ estimate of 102.7. Driven by Deutsche Bank, the German DAX 30 index rose 1.1 percent, highest among regional indexes in Europe. French CAC 40 index added 0.9 percent for the day.

Despite Chancellor Merkel’s support to ECB intervention in bond markets, German Bundesbank president Jens Weidmann reiterated his opposition to the idea, stating parliaments, and not central banks, should make such decisions in democracies.

Such central government funding via the money press may prove addictive like drugs, he warned, making him the lonely voice of reason on the continent.

In the ETF space, the iShares MSCI Germany Index Fund (EWG) rose 0.76 percent despite its key Ifo business sentiment indicator falling for the fourth straight month.

The iShares FTSE China 25 Index Fund (FXI) tanked 1.47 percent after Chinese stocks sank following Morgan Stanley’s downward revision of Beijing 2012 GDP growth forecast to 8 percent from the previous 8.5 percent. Growth for 2013 was lowered to 8.6 percent from an earlier estimate of 9 percent.

There were no noteworthy changes to our Trend Tracking Indexes.

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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