Rate Hopes Lift Old Econ ETFs
Tradable funds focused on the Old
Economy rallied Tuesday after a weaker-than-expected report on consumer
confidence boosted hopes that the Federal Reserve will cut rates by 50 basis
points. Added fears about the economy also chased money into the defensives.
This Consumer Confidence fell by its biggest month-to-month margin in
more than four years. The February Fed Funds Futures
contract now has priced in an average fed funds rate of 5.45% for the month. So
in other words, the contract has priced in a certainty that the Fed will cut the
overnight inter-bank lending rate a half percentage point from 6.00% to 5.00%.
That also equates to a 20% possibility that the Fed will cut the fed funds rate
by 75 basis points to 5.25%.
The Dow Jones Basic Materials iShares
(
IYM |
Quote |
Chart |
News |
PowerRating) gained 4.9%, the day’s largest gain among the exchange-traded
funds. The Basic Industries SPDR
(
XLB |
Quote |
Chart |
News |
PowerRating) rose 3.8%, the Dow Jones
Chemical iShares
(
IYD |
Quote |
Chart |
News |
PowerRating) 2.5%.Â
Among the defensive ETFs,
the Dow Jones Consumer Non-Cyclical iShares
(
IYK |
Quote |
Chart |
News |
PowerRating) added 1.5%, the
Pharmaceutical HOLDR
(
PPH |
Quote |
Chart |
News |
PowerRating) 1.3%, the Consumer Staples SPDR
(
XLP |
Quote |
Chart |
News |
PowerRating).
On the downside, the Internet
Infrastructure HOLDR
(
IIH |
Quote |
Chart |
News |
PowerRating) lost 2.5%, the Biotech HOLDR
(
BBH |
Quote |
Chart |
News |
PowerRating) 2.4%, the
Internet HOLDR
(
HHH |
Quote |
Chart |
News |
PowerRating) 1.9%, the Dow Jones Internet iShares
(
IYV |
Quote |
Chart |
News |
PowerRating) 1.8%.
The top field of all charts in this
commentary uses a logarithmic price scale and displays a 50-day price average in
red. In the second field, a
blue relative strength line represents the displayed security’s price
performance relative to the S&P 500. The third field displays vertical daily
volume bars in black with a 50-day moving average in blue for volume.
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