U.S. equities and other riskier assets are in rally mode in the
first trading session of 2013 after lawmakers finally got around to
agreeing on legislation that steered the U.S. away from the dreaded
fiscal cliff. News that a deal was in the works ignited a rally on
Monday while news that the cliff will be dodged has done the same
today as the Dow Jones Industrial Average is up about 230 points at
this writing while the Nasdaq Composite is sitting on a gain of 2.3
The tenor of Wednesday's U.S. trading session is clearly risk
on, so much so that before 10:30 AM Eastern time, the overall value
of equities and
traded was $73 billion, according to data provided by ETF execution
firm WallachBeth. New York-based WallachBeth noted that only
trading day in all of 2012 - December options expiration - saw
equity value traded exceed $70 billion in the first hour of
In a note to clients, WallachBeth Director of ETF Execution
Services Chris Hempstead highlighted intense buying activity "on
the ask" in several marquee broad market ETFs. Buying on the ask
could be described as "panic buying" to some extent as traders that
are willing to buy on the ask price being shown are indicating they
are willing to pay up to acquire shares of a particular stock or
ETF. The more times the ask price is hit, the more intense a rally
Hempstead said WallachBeth has seen intense "ask buying" in the
PowerShares QQQ (NASDAQ:
), commonly referred to as the Nasdaq 100 tracking ETF, today.
Other popular broad market ETFs where WallachBeth has seen unusual
buying activity include the $38.8 billion iShares MSCI EAFE Index
) and the $3.2 billion iShares MSCI ACWI Index Fund (NASDAQ:
Despite Wednesday's grab for riskier assets, the U.S. government
still has issues to tackle, including the debt ceiling in a few
"With the deal made in Washington leaving most economists
scratching their heads we would cautiously assume that this unusual
volume and skew is not necessarily here for the long run," said
Hempstead in the note. "A drop in volume and liquidity as we
approach the next big near term media buzzword 'debt ceiling' would
not come as a surprise."
Even with the debt ceiling issue inching its way into the
headlines before the fiscal cliff was solved, traders are still
content to embrace high-beta sectors today. WallachBeth, which
provides ETF execution services to clients such as Registered
Investment Advisors and trading desks, said "ask buying" has been
intense in sector funds such as the Financial Services Select
Sector SPDR (NYSE:
) and the Materials Select Sector SPDR (NYSE:
Buyers have also stepped into the Vanguard MSCI Emerging Markets
), the largest emerging markets ETF by assets, in a meaningful way,
according to WallachBeth. Up almost two percent on the day, the
Vanguard Total Stock Market ETF (NYSE:
) has seen a noticeable uptick in volume while the SPDR S&P
Homebuilders ETF (NYSE:
), one of 2012's top sector funds, has seen buyers take the ask to
the tune of a 2.6 percent gain, according to WallachBeth data.
Even with all that ebullience, a cautious approach may be best
over the near-term in Hempstead's eyes.
"...2013 headlines and market sensitivity should get right back
on the spinning 'wheel of media buzzwords' bandwagon with the top
flash cards being: Debt Ceiling and US credit rating - European
Sovereign Debt - civil unrest in the Middle East--The Iran and
Israel relationship - North Korea - Japan's woes - extreme drought
- extreme flooding - and of course China growth."
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