Strong Manufacturing Pushes Dow To Four Year High; KWT Pops, CVOL Slips

Ulli Market Review Contact

[Chart courtesy of]

US stocks edged higher Tuesday after the latest ISM data indicated that US manufacturing activities expanded in April, offsetting concerns of an economic slowdown.

The Dow hit its highest level since 2007 on hopes of better jobless data due this week. Treasury yields climbed from near three-month lows after slipping yesterday as two regional Federal Reserve presidents announced that the central bank may hike interest rates earlier than estimated.

The Dow Jones Industrial Average (DJIA) climbed 0.5 percent for the day, its highest ending since Dec 2007. The S&P 500 Index (SPX) rose 0.6 percent with energy leading the gainer’s pack among the 10 industry groups.

Treasuries retreated after the Institute for Supply Management report showed US manufacturing rebounded unexpectedly in April. Risk appetite was also supported following Chinese manufacturing’s expansion for the fifth straight month, easing worries of a so-called hard landing.

ETFs in the news:

Among the day’s gainers, the Market Vectors-Solar Energy ETF (KWT) remained among the toppers, adding 3.84 percent on the day. Energy stocks remained in the headlines, closing 1.7 percent higher on an average in the S&P 500.  KWT primarily invests in US and foreign companies that are engaged in the production and distribution of solar power.

The iShares FTSE EPRA/NAREIT Europe Index Fund (IFEU) rose 3.69 percent as China manufacturing showed signs of strength for the fifth month in a row. IFEU has heavy exposure, about 60 percent, in Asia-pacific real-estate securities and a Chinese economic gain bodes well for this ETF.

Among the day’s top losers, the Barclays iPath Short Extended S&P 500 TR ETN (SFSA) slumped 10.58 percent. This is an inverse 3X leveraged product and is not suitable for the faint-hearted. Stay away from SFSA, if you belong to the conservative camp.

The C-Tracks Citi Volatility Index TR ETN (CVOL) dropped 4.42 percent as risk sentiments improved over strong US manufacturing data. The so-called fear-tracking VIX index tumbled as investor confidence remained robust.

It seems to me that investor complacency has set I again as downside risk along with some of the weak data points of the past weeks are simply ignored.

Our Trend Tracking Indexes (TTIs) remain on the bullish side of the line, but with this market having come this far so fast, I can’t help but think that, given global economic realities, a correction of some sort, possibly caused by the worsening events in  Europe, is close at hand.

Disclosure: No holdings

Contact Ulli

Leave a Reply