Equities Slump After Phil Fed Talk; Europe Rises On US Data

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[Chart courtesy of MarketWatch.com]

US stocks gave up early gains Tuesday to hit a two-week low despite positive reports on US housing and consumer confidence after Philadelphia Fed President Charles Plosser said the central bank’s latest debt purchase program is unlikely to boost growth.

Equities had moved north earlier after a Conference Board report showed US consumer confidence surged in September while the S&P/Case-Shiller index recorded gains for the fourth straight month.

After rising 61 points earlier on the day on positive data, the Dow Jones Industrial Average (DJIA) slipped 101 points as breadth within the blue-chip index turning overly negative with 25 of the 30 components finishing the day lower.

Extending losses for the fourth straight session, the S&P 500 Index (SPX) fell 15 points with all the 10 business sectors tumbling. Technology and financial sectors fronted the day’s percentage decliners.

US debts moved higher with the 30-year Treasury bond extending its winning ways for the seventh straight day, its longest streak in almost four years. The benchmark 10-year Treasury yield fell four basis points to 1.67 percent after rising to 1.73 percent while yield on 30-year Treasury bonds lost four basis points to trade at 2.85 percent.

The Dollar turned higher to reverse course after Philadelphia central banker Charles Plosser blasted Bernanke’s latest stimulus efforts. The dollar index, a measure of the greenback’s strength against a basket of six currencies, climbed to 79.673 from 79.573.

Across the Atlantic, European stocks rallied in late-session, inspired by improved US consumer-confidence and housing data. The pan-European Stoxx Europe 600 index ended 0.4 percent higher after struggling for direction for most of the day.

Spain’s IBEX 35 equity index settled 0.5 percent higher despite the country’s 10-year borrowing costs rising eight basis points to 5.72 percent. Markets had slumped Monday after a German news magazine reported Greek budget deficit may have doubled. Greece must close budget gaps to qualify for the second tranche of bailout funds.

In the ETF space, volatility-linked funds vaulted after weeks of battering. The CBOE Volatility Index surged 9.05 percent, pushing up the Barclays iPath S&P 500 VIX Short-Term Futures ETN (VXX) an eye-popping 7.93 percent on the day.

The ProShares VIX Short-Term Futures ETF (VIXY) also vaulted, rising 7.65 percent on the day.

The State Street SPDR Homebuilders ETF (XHB) witnessed a volatile trading session today. The fund gapped higher after positive housing data in early trade only to slump later after a US Fed non voting member said monetary stimulus is unlikely to help improve the economy or unemployment rate. Eventually XHB finished 1.72 percent lower.

Our Trend Tracking Indexes (TTIs) declined but remain solidly above their respective trend lines

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