Major Market ETFs Rally As Fed Signals Low Rate Continuation; GDXJ Pops, VXX Sinks

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Major market ETFs rallied for the second day Thursday, marking its biggest two-day gain in 2012, as the Federal Reserve signaled continuation of low interest rate and accommodative monetary policies to avoid a slowdown.

Sentiments were also buoyed after data released by the Chinese central bank showed new loan volumes were higher than estimated, reducing fears of the economy’s hard landing this year. Also, there were indications of the US first quarter earnings coming in better than expected mainly because of lowered expectations.

Treasuries slumped for the second day, as investors embraced news of falling borrowing costs in peripheral European nations with hopes that global central banks would intervene with stimulus measures to avoid a double-dip recession. I view this only as a temporary halt on a trend to higher rates.

Earlier in the day, US bonds had rallied after a Labor Department report showed an unexpected 13,000 initial jobless claims rise, stoking fears of another slowdown, but the data was simply ignored as Wall Street focused on the moment consisting of sharply rallying stock prices.

In the end, the Dow Jones Industrial Average (DJIA) climbed 1.4 percent, posting the year’s second biggest point gain while the S&P 500 Index (SPX) rose 18.86 points with natural resources companies gaining the most.

The tech-heavy NASDAQ Composite (COMP) jumped 39.09 points to end at 3055.55.

Yields of 30-year Treasuries climbed the most since April 6, adding 0.02 percentage points, to end at 3.22 percent. Benchmark 10-year yields climbed 2 basis points to 2.06 percent.

ETFs in the news:

As natural resources stocks rallied today, precious metal miner ETFs enjoyed strength. The Market Vectors Junior Gold Miners ETF (GDXJ) jumped 4.63 percent whereas bullion tracking products like the iShares Silver Trust (SLV) and the iShares Gold Trust (IAU) made decent gains as well.

The Global X Uranium ETF (URA) posted strong gains as material stocks led the day’s progress. URA rose 5.11 percent, while the SPDR S&P Metals & Mining ETF (XME) and the Market Vectors Coal ETF (KOL) managed to end in the positive territory as the week draws to an end.

The FTSE China 25 Index Fund (FXI) jumped about 3.55 percent ahead of China’s GDP numbers tomorrow. Traders attributed today’s gains to rumors that the country grew 9 percent in Q1 against the forecast 8.4 percent. The Guggenheim China Small Cap ETF (HAO) also climbed 3.74 percent as emerging markets remained in focus.

The iShares Dow Jones U.S. Oil Equipment & Services Index Fund (IEZ) added 3.39 percent on the day after a rough ride.

Among the day’s top losers, the S&P 500 VIX Short-Term Futures ETN (VXX) tumbled 8.63 percent following the strong gains made by the broad market indices today. Strong Google results and a better-than-expected Chinese GDP number may drive this fear index further down in future.

Our Trend Tracking Indexes (TTIs) recovered as well, especially the international one, which had suffered the most during the recent bout of selling. It has rallied back to +3.57 percent while the domestic TTI has moved to +4.72 percent.

Disclosure: No holdings

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