Major ETFs Erase Morning Losses On Bernanke Letter


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Major ETFs rebounded from morning weakness to post gains by midday Friday on news that the European Central Bank is considering setting interest-rate limits on a new-bond buying program in hopes of controlling borrowing rates for Greece, Spain and other indebted eurozone countries.

In addition, a letter from U.S. Federal Reserve Chairman Ben Bernanke to a congressional oversight panel surfaced saying that the Fed has room to enact more stimulus to help boost the economy.

Market Overview

In afternoon trade, SPDR S&P 500 ( SPY ) rose 0.53%. So far it's lost 0.51% for the week, breaking a six-week winning run.

SPDR Dow Jones Industrial Average ( DIA ) snapped a five-day losing streak, gaining 0.54%

PowerShares QQQ ( QQQ ), a basket of the 100 largest nonfinancial stocks on the Nasdaq, climbed 0.75%. After recovering most of its losses from earlier this week, it's on track to end the week ahead a mere 0.09% and up six weeks in a row.

ETF investors can expect more volatility from the Fed's annual meeting in Jackson Hole, Wyo., at months' end.

"Further downside action is expected as traders flee The Street for the last week of summer," the Stock Trader's Almanac wrote in its latest client note. "After Labor Day, we then have to contend with the volatile months of September and October.

"Election years do little to improve the ugly market performance records of these infamously bad market months."

Big Movers

IShares Dow Jones U.S.Home Construction ( ITB ) rose the most among nonleveraged, domestic equity ETFs, adding 1.63% to a 52-week high of 18.08. July building-permits data was revised lower to a seasonally adjusted rate of 811,000, by the Commerce Department. Permits rose 6.7% from June vs. 6.8% reported earlier. Permits indicate future construction activity. ITB sports the highest IBD Relative Strength Rating among nonleveraged ETFs, 95, which means its price performance is outpacing 95% of the market's issues. Its robust B+ Accumulation/Distribution Rating means institutional investors are buying more shares than selling.

IShares Nasdaq Biotechnology ( IBB ) lifted 1.24% as it found support at its 50-day moving average. It owns a healthy 86 RS and B Acc/Dis Ratings combination.

Weekly Money Flows

Retail investors have been weary of the rally that started in June. They've pulled money out of U.S. equity funds for the sixth week in a row with actively managed funds seeing the most outflows, according to EPFR Global.

They've opted instead for gold, high-yield bonds and municipal bonds. Investors pulled $847 million out of stock funds during the week ended Aug. 22, while pouring $4.9 billion into bond funds. About 60% of that went into U.S. bond funds. Flows into gold and precious metals funds climbed to a 29-week high.

Economic Reports

U.S. durable goods orders for July expanded 4.2% month-over-month vs. a consensus forecast of 3.0%. They rose 1.6% the prior month. But if transportation is excluded, mainly aircraft production, orders shrank 0.4% for the month. Nondefense capital goods orders -- excluding aircraft -- fell by 3.4%.

The U.S. dollar trading against a basket of foreign currencies found support at its 200-day moving average after a four-day losing streak this week on a Federal Reserve minutes release that hinted it would consider more quantitative easing to support economic growth. The euro lost ground against the dollar as the European Central Bank's bond purchasing plan was postponed until Germany's ruling on the eurozone bailout fund. PowerShares DB U.S.Dollar Index Bullish (UUP) picked up 0.18%.

Follow Trang Ho on Twitter @TrangHoETFs .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing ETFs
Referenced Stocks: DIA , IBB , ITB , QQQ , SPY

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