Markets Hit Pause Button As Equity Rally Fades; Investors Looking For Direction From The ECB

[Chart courtesy of MarketWatch.com]

The US equity rally faded after three straight up days with Wall Street turning cautious even as the Dow industrials and S&P 500 managed to stay in the green while the NASDAQ slipped.

European stocks ended marginally higher as Europe chose to ignore the region’s negative economic data and focus on the possibility of an early ECB intervention instead while investors rushed to book profits in sectors that have moved significantly in the latest rally.

Meanwhile Spanish equities fell marginally, giving back some of the four percent plus gains posted since Friday last. Greece stocks eased after ratings agency S&P cut Athens to negative from stable stating the nation may not secure further bailout money from the International Monetary Fund and the European Union institutions after failing to stick to budget targets.

Back home, the benchmark US 10-year Treasury yield rose to a five-week high on a choppy day despite dropping earlier when the Spanish and Italian sovereign ratings cut, German industrial production slip and lower UK growth forecasts weighed on investors.

Meanwhile the US labor market continued to improve in the second quarter. A latest Labor Department report showed non-farm business productivity rose at an annual rate of 1.6 percent in Q2, beating economists forecast of 1.4 percent gain. Q2 productivity climbed 1.1 percent over the same period last year.

However, unit labor costs surged 1.7 percent in Q2 over Q1 as compensation climbed faster than productivity during the quarter. Economists however attributed the rise to discretionary bonus income and said it was in line with the goods and services inflation trend.

Within the ETF universe, the First Trust Consumer Staples AlphaDEX Fund (FXG) was the day’s biggest gainer as the consumer-staples sector outperformed other business groups within the S&P 500. FXG jumped 2.72 percent while the Teucrium Corn Fund (CORN) climbed 1.67 percent after the USDA cut corn output forecast by 15 percent citing damage to crops due to drought in the Midwest.

As risk sentiment remained robust, the so-called fear-tracking volatility index continued to slide. The ProShares VIX Short-Term Futures ETF (VIXY) tumbled 4.05 percent as the CBOE Volatility Index (VIX) plunged 4.19 percent on the day.

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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