The major ETFs lacked direction Wednesday after hitting
four-year highs the prior session and despite Federal Reserve
hints of more economic stimulus and positive housing data.
Federal Reserve minutes released Wednesday showed it's taking
steps to boost the economic recovery and that stimulus would be
needed if the economy fails to show stronger growth.
U.S. homes sales rose 2.3% in July to 4.47 million units vs.
3.37 million in June, according to the National Association of
Realtors. But the market was expecting 4.5 million homes
IShares Dow Jones U.S. Home Construction (
) jumped 2.89%.
SPDR S&P Homebuilders (
) climbed 1.75%.
Both ETFs surged about 11% year to date. They have strong IBD
Relative Strength Ratings in the low to mid-90s and healthy
Accumulation-Distribution Ratings of B and B-.
In afternoon trade,SPDR S&P 500 (
) picked up 0.08%.
SPDR Dow Jones Industrial Average (
) shed 0.16%.
PowerShares QQQ (
), a basket of the 100 largest nonfinancial stocks on the Nasdaq,
SPY has rallied 14.03% year to date and 28.51% in the past
year. But retail investors have missed out on the party.
U.S. mutual funds investors have pulled $68 billion out of
funds investing in U.S. stocks this year (through Aug. 8) and
$188 billion over the past 12 months, according to ConvergEx
Group, a technology company that services asset managers. They've
opted instead for fixed-income and foreign funds, which saw $185
billion and $22 billion in inflows this year.
Investors don't believe in the multiyear rally that started in
March 2009 and appear to be focusing on the negative headlines,
"Economic growth is lackluster around the developed world, job
growth in the U.S. is moribund at best, and exactly none of the
problems that plague European policy makers has any resolution,"
ConvergEx wrote in a client note.
On the flip side, U.S. stock ETFs have attracted $22.5 billion
year to date and $49.6 billion over the last 12 months. ETFs as a
whole pulled in $90.7 billion so far this year. These data also
suggest ETF investors have also opted for bonds, foreign stocks
and others over the U.S. stocks.
"The major market ETFs (SPY, QQQ and DIA) have definitely been
climbing a wall of worry, fueled in part by the lack of
significant retail interest and cash sitting on the sidelines
slowly being forced into the market," said Thomas Yorke, managing
director of Oceanic Capital Management in New York. "It's been
helpful to a degree that globally, particularly in Europe, most
politicians have been on holiday and therefore less inclined to
make major statements."
Daniel Beckerman of Beckerman Institutional in Oakhurst, N.J.,
believes global markets have been cheering European Central Bank
President Mario Draghi's pledge that the ECB will do "whatever it
takes" to save the euro.
"When Mario Draghi sounds like Ben Bernanke, it certainly
excites the market, with the potential for more global QE
(quantitative easing)." Beckerman said. "Also, on a relative
basis stocks do not seem very pricey. Even after the rally, U.S.
stocks trade at about 13 times earnings. Developed and emerging
market stocks are trading at even lower P-Es (price-earnings
ratios) and you have bond yields at extremely low levels."
IShares MSCI EAFE Index (EFA), tracking developed foreign
markets, was nearly flat Wednesday. EFA has rallied 8.62% year to
date and 8.48% the past 12 months.
IShares MSCI Emerging Markets Index (EEM) ticked up 0.20%.
It's gained 7.78% year to date and 4.00% in the past 12
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