Major Market ETFs closed higher Tuesday for the second straight day, pushing the Dow Industrials into the green territory and snapping four loss-sessions, as investors cheered a better-than-expected ISM index’s nonmanufacturing businesses reading.
Gains, however, were limited as the ongoing European sovereign debt crisis continued to overshadow this positive US economic development. Ratings agency Standard & Poor’s warned Monday that there is one-in-three chance that Greece will leave the eurozone in the coming months.
US Treasuries headed down for the second day in a row as reports indicated that the G-7 countries are discussing measures that’ll throw a safety net around Europe’s banking sector. Sure, let’s wait and see if there is some meat on this bone for a change.
The Dow Jones Industrial Average (DJIA) climbed 0.2 percent, as the Institute for Supply Management’s Services index rose from 53.5 in April to 53.7 in May, beating economists’ forecast of 53.1. Services industry is the economy’s biggest component and any reading above 50 indicates expansion.
The S&P 500 Index (SPX) rose 7.32 points with financials outpacing others among index’s 10 business groups while the tech-heavy NASDAQ Composite (COMP) added 0.7 percent, its second day of gains.
Treasury 10-year yields rose five basis points to 1.57 percent ahead of European Central Bank’s policy meeting tomorrow. Yields on 30-year bonds rose 7 basis points to 2.64 percent in late afternoon trade in New York, as markets hoped for concrete policy announcements from EU leaders.
ETFs in the news:
Homebuilder stocks came out on top today on stronger-than-anticipated service sector data. Services contribute the most to the US economy, and a robust reading indicates non-manufacturing jobs are picking up.
After being nailed for the last two sessions, home builder Lennar Corp and PulteGroup Inc rallied today as robust job numbers are expected to stimulate housing demand. The iShares Dow Jones U.S. Home Construction Index Fund (ITB) jumped 3.35 percent for the day as its top holding Lennar Corp vaulted 6.71 percent. Despite recent corrections, ITB is higher by 15.49 percent since January.
Other home-building linked products like the State Street SPDR Homebuilders ETF (XHB) also remained in black, adding 2.47 percent for the day.
As the financial sector remained the day’s biggest gainer on the S&P 500, financials linked ETFs ended in the green territory. The State Street Financial Select Sector SPDR (XLF) ended 1.65 percent higher as two of its biggest holdings, JP Morgan Chase and Bank of America, topped the winner’s list on the SPX.
As investor sentiment improved for the second day today, the so-called fear-tracking volatility index (VIX) settled below the 25 level for the first time in more than a week. The Barclays iPath S&P 500 VIX Short-Term Futures ETN (VXX) tumbled 2.31 percent as VIX plummeted more than 5 percent on the day. The fund has lost a whopping 39 percent since the beginning of the year.
Trend wise, we did not make much headway one way or the other with our Domestic TTI hanging on above the line by +1.15%, while we remain stuck with the bears on the international side by -6.10%.
If you are following our ETF Model Portfolios, the latest update will be posted tomorrow morning at 6 AM PST.
Disclosure: No holdings
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