US Stocks Crawl Higher On Budget Hopes, Fed Stimulus; Europe Rises On German Confidence

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

US stocks finished higher with the Dow Industrials erasing losses since the Election Day and the S&P 500 rising for the fifth straight day as optimism grew that the Federal Reserve will announce more stimulus when wrapping up its final meeting of the year tomorrow and awaited progress on federal budget negotiations in Washington hopefully comes to pass.

Equity averages trimmed early gains after Senate Majority Leader Harry Reid said the Republicans have offered no details on what they want from the negotiations. However, House Speaker John Boehner said he was hopeful of an accord while addressing the House of Representatives Tuesday.

The two-day long Federal Reserve Open Market Committee meeting began in Washington today that will end in updated projections on unemployment, inflation and economic growth. Investors expect the Fed to supplement the $40 billion a month mortgage-purchases with another round of Treasury purchases when their bond swapping program, known as Operation Twist, expires at the end of the month.

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Indexes Rise On Budget Hopes, China; Europe Tracks Higher; Stunning Video Demonstrates US Debt

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

The major market indexes finished modestly higher with the S&P 500 index extending tiny gains into the fourth straight session, it’s longest since August after economic data in China beat estimates, overshadowing political uncertainties in Europe and the continued stalemate over budget negotiations in Washington.

Europe was back in the spotlight after Italian Prime Minister Mario Monti unexpectedly announced plans to step down after the parliament passes a national budget later this month.

In Asia, Chinese stocks rallied with the Shanghai Composite Index jumping to a four week high after retail sales and factory output data beat economists’ estimates while revised data indicated Japan has slipped into recession.

In the US, the President and the House Speaker John Boehner met one-on-one at the White House to discus how to avert the billions in spending cuts and tax hikes set to start next year.

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ETFs/Mutual Funds On The Cutline – Updated Through 12/7/2012

Ulli ETFs on the Cutline Contact

Below are the latest ETF Cutline reports, which show how far above or below their respective long-term trend lines (39 week SMA) my currently tracked ETFs/MFs are positioned.

The first report covers the ETF Master List from Thursday’s StatSheet and includes 398 ETFs, of which currently 342 (last week 332) of them are hovering in bullish territory.

The second report includes only High Volume ETFs. To clarify, High Volume (HV) ETFs are defined as those with an average daily volume of $10 million or higher.

These ETFs are generated from my selected list of some 93 that I use in my advisor practice. It cuts out the “noise,” which simply means it eliminates those ETFs that I would never buy because of their volume limitations. 78 ETFs (last week 73) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 723 (last week 701) above the line and 136 below it out of the 861 that I follow.

Take a look:

1. ETF Master Cutline Report

2. ETF High Volume Cutline Report

3. MF Cutline Report

In case you are not familiar with some of the terminology used in the reports, please read the Glossary of Terms.

Last Week In Review: ETF News And Blog Posts To 12/9/2012

Ulli Market Review Contact

In case you missed it, here’s a summary of the ETF topics and market reviews I posted to my blog during the week ending on 12/9/2012.

More bobbing and weaving in a tight trading range was the theme of the week, as the S&P 500 managed to eke out 2 points.

I don’t know about you but I am feeling ‘Fiscal Cliff’ fatigue setting in as no progress seems to have been made. It appears to me that the market has not priced in the possibility of a failed agreement between the warring parties, and hope reins superior.

If the squabbling and finger pointing continues, we may not see a market reaction until after the 1st of the year when the reality has set in that we may be actually sliding down the much feared cliff, should a compromise prove to be elusive.

Again, my view remains the same that politicians will not get serious about addressing the issues until they’re forced to. And the only thing that will provide the necessary motivation is for the markets to speak up loudly via a sharp downside correction.

Over past week, we covered the following:

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One Man’s Opinion: Will Tax Hikes Push The US Economy Back Into Recession?

Ulli Market Commentary Contact

 

Friday’s better-than-anticipated jobs number makes it a little bit easier for President Obama to hike taxes on the wealthy, says Barry Knapp, Head of Equity Strategy at Barclays Capital.

However, on close examination, you’ll see earnings-growth has been very tepid and total hours worked has remained flat.  In other words, every one-tenth of that total hours worked is worth 300,000 jobs in terms of income. That means income growth has been slow, but the unemployment rate coming down and a headline number stronger than expected does strengthen the President’s hand, Barry said.

Barclays is worried about getting a bad mix when the final deal is struck, he noted. The more you try to tax your way out of it, much like the Italians and the Spanish have done, the bigger the impact is on the macro-economy and on investors in particular, because obviously we are talking about capital gains rates and dividend rates. So, the latest report probably strengthens his hand and moves us a little bit toward an outcome that increases tax at the expense of really cutting entitlements, getting our long-term debt under control, Barry observed.

New ETFs On The Block: Powershares S&P 500 Downside Hedged Portfolio ETF (PHDG)

Ulli Long/Short ETFs Contact

 

Invesco PowerShares, the fourth largest US ETF issuer and a leading global provider of exchange traded funds, has announced plans to launch an actively managed fund, the PowerShares S&P 500 Downside Hedged Portfolio ETF (PHDG) this week.

The fund seeks to mitigate risk and volatility and provides investors broad US equity market exposure that hedges downside risk with cash positions and VIX futures.

PHDG aims to deliver positive total returns in rising or falling markets that are not directly correlated to the broad equity or fixed income market returns. The fund seeks to achieve this objective by using a rules-based and quantitative strategy that is designed to provide returns that follow the performance of the S&P 500 Dynamic VEQTOR Index.

The S&P 500 Dynamic VEQTOR Index is part of S&P’s strategy index series and dynamically allocates long-only exposures between the S&P 500, S&P VIX Short-term Futures Index and cash depending upon market conditions.