Major ETFs lost ground in quiet trade Tuesday as the market
waits for the Federal Reserve to finish a two-day meeting in
which it's expected to announce new stimulus measures to boost
Market Vectors Oil Services ETF (
), down 2%, was among the biggest decliners of nonleveraged ETFs
as oil prices fell 2.11% to $89.74 a barrel. OIH has been lagging
the market for 15 months and appears to have hit price resistance
at its 200-day moving average.
IShares Dow Jones U.S.
Home Construction (
) andSPDR S&P Homebuilders (
) were also down 2.14%.
U.S. home prices rose for the second month in a row after
seven straight months of declines. Standard & Poor's
Case-Shiller home-price data showed a 2.2% increase for both the
10 major metropolitan area index and the 20-city index in May vs.
April's readings. On a seasonally adjusted basis, prices rose
0.9%. But on a year-over-year basis, the 10-city index is down
1.0% and the 20-city index is down 0.7%.
The spring and summer months are seasonally strong months for
purchases. Downside risk for homebuilders is mounting for the
second half of the year, Deutsche Bank analysts say.
"It shouldn't take more than muddle-through economic growth
for housing recovery to continue, but the risks are that even
that doesn't happen or it happens unevenly against tenuous
investor optimism," Nishu Sood and Rob Hansen of DB wrote in a
client note last week.
Homebuilder shares are trading at historically high valuations
because earnings are still small, they noted. The stocks
currently trade at 22.1 times 2013 earnings, which is above their
P/E range of 5 to 15 in the 1990s and 2000s.
ITB and XHB are among two of the strongest stock ETFs on the
market. ITB rallied a whopping 40% year to date and 42% in the
past 12 months. XHB climbed 27% and 30% over those periods. ITB
has a stronger IBD Relative Strength Rating, 93, and
Accumulation/Distribution Rating, B-, than XHB. ITB appears to be
pulling back to its 10-week moving average after hitting a
52-week high earlier this month.
In afternoon trade, the
SPDR S&P 500
) shed 0.14%.SPDR Dow Jones Industrial Average (
) gave back 0.11%.PowerShares QQQ (QQQ), a basket of the
100-largest nonfinancial stocks on the Nasdaq, added 0.23%.
"Right now we have a friendly, some say overly friendly,
Federal Reserve and a lot of pessimism on the part of investors,"
Stephen Todd of the Todd Market Forecast wrote in a client note
released Tuesday. "Remember people get bearish at bottoms and
bullish at tops."
"Merrill Lynch's proprietary sell-side indicator is at its
most bearish in 15 years. Previous visits to this level have
resulted in substantial rallies," he added.
The risks of economic and corporate weakness have already been
priced into stocks, says Bob Doll, a senior advisor at
"Investors remain focused more on macro trends and issues than
on market fundamentals," Doll wrote in his weekly market
commentary. "In particular, investors' ability to shrug off a
period of earnings weakness as they focus on additional policy
help suggests that the current equity bull market still has some
IShares MSCI EAFE Index (EFA), tracking developed foreign
markets, lost 0.33%.IShares MSCI Emerging Markets Index (EEM) was
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