Money Takes Medicine
Anxiety over corporate profits and
energy prices chased dollars into defensive drug and consumer staples stocks Thursday,
lifting tradable funds focused on those sectors. Tech stocks, with the exception
of biotechs, took a bath, drenching the Qubes and tradable funds focused on
technology.
The Pharmaceutical HOLDR
(
PPH |
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PowerRating)
jumped 4.0%, the day’s biggest gain among the exchange-traded
funds. Among the HOLDR’s largest components, Pfizer
(
PFE |
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PowerRating), which
has a 25% weighting in the basket of drug stocks, rose 3.9%. Merck
(
MRK |
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PowerRating),
with a 16% weighting, traded up 3.3%. Johnson & Johnson
(
JNJ |
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PowerRating), with a
13% weighting, added 3.5%. The Pharmaceutical HOLDR has run up 8% over the past 11
sessions from an overbought level on the Relative Strength Index.
The Consumer Staples SPDR
(
XLP |
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News |
PowerRating)
rose 2.7%. The ETF owed most of the gain to drug stocks. Another large
component, Procter & Gamble
(
PG |
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PowerRating), added 1.7%.
The Cyclical/Transportation SPDR
(
XLY |
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PowerRating)
gained 3.8%, spurred by rebounding retail stocks. Among its major components,
Wal-Mart
(
WMT |
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PowerRating)Â climbed 3.1%, Home Depot
(
HD |
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PowerRating) 3.8%, Costco
(
COST |
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PowerRating)
3.3%.
On the downside, the Nasdaq 100
Tracking Stock
(
QQQ |
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PowerRating) fell 7.1%, the stiffest loss among the exchange-traded
funds. The B2B Internet HOLDR
(
BHH |
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PowerRating) lost 3.8%, the Semiconductor HOLDR
(
SMH |
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PowerRating)
3.4%, the Broadband HOLDR
(
BDH |
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PowerRating) 2.9%, the Dow Jones Internet iShares
(
IYV |
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PowerRating)
2.3%, and the Technology SPDR
(
XLK |
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PowerRating) 2.1%.
Profit-taking in the oil patch led the
Energy SPDR
(
XLE |
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PowerRating) 1.1% lower.
Financial stocks weakened, pressuring
the ETFs fishing in those waters. The Dow Jones Financial iShares
(
IYF |
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PowerRating) gave
up 1.1%, the Financial SPDR
(
XLF |
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PowerRating) 1.1%, the Regional Banking HOLDR
(
RKH |
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PowerRating)
1.3%.
The Federal Deposit Insurance Corp.
reported that commercial bank earnings declined 25% sequentially to $14.7
billion in the second quarter, their lowest level since 1997. The report
came a day after the Office of the Comptroller of the Currency raised
questions about declining lending standards and a rising level of risky loans in
bank portfolios.Â
The sector also took a hit from Morgan
Stanley Dean Witter
(
MWD |
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PowerRating). The investment bank said Q3 profits rose 29% but
results fell short of Wall Street expectations. Shares fell 6.9%.
Morgan Stanley, which is also the No.
2 U.S. brokerage and owns the Discover credit card, shocked investors with the
shortfall because it had beaten estimates in the last 15 quarters. A slowdown in
investment banking fees, coupled with a dramatic decline in trading revenues
from this year’s second quarter, caused the downward surprise.
Morgan Stanley posted a net income of
$1.25 billion, or $1.09 per diluted share, for the three months ending Aug. 31.
That compared with profits of $970 million, or 83 cents per share, in the
year-ago period, but was down from $1.26 per share in the second quarter.
If you’re new exchange-traded funds,
be sure to visit TradingMarkets’ Knowledge Center,
dedicated to explaining the basics of trading and active investing in ETFs and
mutual funds. Just click on the Funds tab
near the top of this page, then click on the Knowledge
Center tab.Â
You also will find lessons on trading
exchange-traded funds in the Stocks Education area of TradingMarkets.com. In
particular, check out my three-part series on trading ETFs, starting with
Average Crossovers. I also recommend newcomers read my tutorial,
HOLDRs: Unique Opportunity And Risk.