The big news of the day was the early afternoon release of the minutes from the latest FOMC meeting. The tone became more hawkish, suggesting that QE may end sooner rather than later and that affected the entire market. Here is how certain asset classes were affected.
- Stocks moved from modest gains to the lows of the session before a slight bounce into the close. The reasoning behind the selling was that the Fed floor that has been built into stocks may be ending in late 2013.
- Gold took an even bigger hit, the SPDR Gold ETF ($GLD) closed down 1.2% and wiped away yesterday's gain. As the printing of money comes to a halt it should be a boost to the U.S. Dollar and thus negative for gold.
- U.S. Dollar rose as measured by the PowerShares US Dollar Index Bullish ETF ($UUP). The ETF finished the day up 0.8% at a new one-month closing high.
- U.S. Treasuries fell in value as yields pushed higher. When the Fed stops artificially keeping rates low it will lead to a rise in interest rates on government issued bonds and the values of the underlying bonds will fall. The iShares Barclays 20+ Year Treasury Bond ETF ($TLT) fell 1.35% and closed at the lowest level since May 2011. The ETF is now down 11% from a July 2011 high. On the flipside, the ProShare Ultrashort 20+ Year Treasury ETF ($TBT) rallied 2.7% to a new multi-month high.
A mixed bag as far as sectors today. The Transports ($IYT) broke out to a new 52-week high, led by the Airlines ($FAA) that surged 1.7%. The Pharmaceuticals ($IHE) also had a solid day with a gain of 1.1%, but they are well off their yearly high.
The Airlines are an interesting group because even as the price of oil has picked up recently, the Guggenheim Airline ETF ($FAA) continue to hit new highs. We recommended buying $FAA a few months ago for subscribers to The ETF Bulletin and since that time the ETF is up 23%!!
If you would like more info on becoming a subscriber to The ETF Bulletin please call 1-877-383-7366 or email info@pennfinancialgroup.com
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