Oil ETFs, such as the United States Oil Fund (NYSEArca:USO),
dropped sharply on Friday after the U.S. government reported that
employment in April expanded less than had been forecast, fueling
views that the economic recovery is losing steam and that oil
demand is likely to soften.
The U.S. economy generated 115,000 nonfarm jobs in April-below
the 168,000 forecast by economists, according to a report in the
Wall Street Journal. However, March data were revised upward to
reflect 154,000 new jobs from the 120,000 reported initially.
Still, the report's downside was more than enough to send stocks
lower, Treasurys higher and, not least, oil lower. Nearby crude
futures on the NYMEX briefly gapped down 2.5 percent to below $100
for the first time in more than two months, and the Dow Jones
industrial was down 165 points, or 1.25, to 13,040.58 in early
Friday afternoon trade.
In the ETF market, that translated to the front-month
futures-based USO dropping $1.70, or 4.4 percent, to $37.14 a
share. The PowerShares DB Oil Fund (NYSEArca:DBO), an ETF designed
to minimize the costs of rolling contract exposures in
futures-based investment strategies, also fell-about 4.4 percent to
$28.24 a share, according to data posted on Google Finance.
While oil demand in the U.S. has been steady to lower over the
past three years due to the sluggish economy and even a growing
number of more fuel-efficient vehicles on U.S. roads, oil continues
to play a canary-in-the-coal-mine role in the economy. Once
economic signals suggest weakness, oil moves lower and, conversely,
when economic indicators improve, oil quickly catches a bid in
The weakness in oil extended to equities-based ETFs such as the
Energy Select Sector SPDR Fund (NYSEArca:XLE) and the Vanguard
Energy ETF (NYSEArca:VDE), which declined 1.74 percent and 2.59
Fed Talk Helps Gold
The jobs report also stoked talk that the Federal Reserve might
again move into fixed-income markets to purchase bonds to keep
yields low, and thereby encourage growth-supporting borrowing.
The prospect of more "quantitative easing" by the Fed never
fails to lift the gold market, as many argue that such central bank
activity weakens the dollar, enhancing perceptions of the yellow
metal as a superior store of value.
The SPDR Gold Shares (NYSEArca:GLD), the $67 billion physical
bullion fund and the second-biggest ETF in the world, was up about
a third of a percent, or 57 cents, to $159.52 a share. Also, the
Market Vectors Gold Miners ETF (NYSEArca:GDX) was up 1 percent to
$44.31 a share.
The iShares Barclays 20+ Year Treasury Bond Fund
(NYSEArca:TLT)-a mainstay in the ETF market that cherry-picks
long-dated U.S. government debt-was up about 0.75 percent to
$118.05 a share-another sign the market fears economic growth is
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