After European Central Bank President Mario Draghi essentially
said the ECB could purchase unlimited amounts of European bonds in
an effort to stem the continent's sovereign debt crisis, U.S.
equities predictably rallied. The S&P 500 and the Nasdaq
Composite each added about two percent while the Dow Jones
Industrial Average fell just short with a pop of 1.9 percent.
Combined with some positive U.S. economic data points, the
European headlines were enough to send the S&P 500 to its
highest levels since January 2008. Thursday's performance certainly
gives the bulls something to crow about, but one day of gains does
not mean a new world order has been ushered in. In fact, there are
several noteworthy things that have not changed and it is doubtful
these things will change in the near-term no matter how many bonds
the ECB buys.
Spain is Still Risky The yield on Spanish 10-year sovereigns
fell to 6.03 percent, the lowest since June. That is nice, but the
country still has the highest unemployment rate in the Eurozone.
No, that does not mean something on par with U.S. at eight percent.
Spain's jobless rate
stands at nearly 25 percent
The country is in a recession, period. A 5.7 percent gain on
strong volume for the iShares MSCI Spain Index Fund (NYSE:
) adds to what has been an incredible one-month run for the ETF.
EWP has gained 15.3 percent in the past 30 days, but with Spain's
economic woes readily apparent,
EWP still has a yield-trap way about it
Italy is Still a Mess Yields on Italian 10-year sovereigns fell
to a five-month low of 5.26 percent, but like Spain, this is a
country with serious problems and that is bad for global investors
because this is the world's eighth-largest economy.
On nearly double the average daily volume, the iShares MSCI
Italy Index Fund (NYSE:
) gained 5.4 percent. That combined with the ECB news does nothing
to change the fact the fact that
has a debt-to-GDP ratio of 123 percent and a
jobless rate of almost 11 percent as of June
It may sound trite, but the ECB buying bonds does not mean more
consumers are going to gobble up Italian exports as such as
Ferraris and Prada clothing. Italy's GDP contracted by 0.7 percent
in the second quarter.
Investors Still Want Yield This is a good thing compared to the
aforementioned commentary and facts on Italy and Spain. Glancing
across the universe of popular equity-based dividend ETFs, Thursday
was a good day. The Vanguard Dividend Appreciation ETF (NYSE:
), the iShares High Dividend Equity Fund (NYSE:
) and the iShares Dow Jones International Select Dividend Index
) all closed higher.
What is interesting is that volume was below average in all
three of those funds. What could be changing is where investors go
to get their yield fix. Take the Global X SuperDividend ETF (NYSE:
) for example. SDIV added almost two percent on Thursday on volume
that was better than double the daily average,
indicating the super dividend ballgame is just
Risk On: Not All The Way Back One day does not make a trend, nor
does it confirm the full return of the risk on trade. There were
some faint signs that risk has not fully returned on Thursday. Not
all emerging markets equities and ETFs got in on the fun and energy
names wilted into the close. Just look at the charts of the Energy
Select Sector SPDR (NYSE:
) and National Oilwell Varco (NYSE:
) as two examples.
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