Although many were relieved with the announcement of QE3, yet another Fed official openly criticized the recent stimulus efforts today, making markets extremely leery of the U.S. economy’s future prospects. Federal Reserve Bank of Philadelphia President Charles Plosser warned that the new mortgage bond-buying program is unlikely to boost economic growth, and the policy move can actually hurt the central bank’s credibility. He further stated that “If the public loses confidence in the central bank, our ability to set effective monetary policy in the future will be harmed and households and businesses will feel the consequences”. And as yet another wave of global pessimism hit Wall Street, bearish momentum held its ground for a second day in a row [see Free Report: Seven Simple & Cheap All-ETF Model Portfolios].Global Market Overview: Fed Division Spooks Markets
Despite U.S. Consumer Confidence and home prices reports coming in better than expected, U.S. equities tumbled into negative territory after holding initial gains during early morning hours. Nasdaq (QQQ) and the Dow Jones Industrial Average (DIA) shed 1.36% and 0.75%, respectively. The S&P 500 (SPY) slipped 1.05%, breaking below the widely-watched 1,450 level. European markets closed slightly higher while Asian equities were mixed; China’s Shanghai Composite fell 0.2% and Japan’s Nikkei Stock Average erased early losses to close up 0.3%.
Bond ETF Roundup
U.S. Treasury prices closed higher after a day of zigzag trading. Bolstered by positive economic data on consumer confidence and housing, yields turned lower for the seventh straight session. Meanwhile, a short-tern bill auction in Spanish bonds came at much higher yields, indicating that investors remain weary of the country’s reluctance to ask for a bailout.
Commodity ETF Roundup
After a volatile day of trading, commodities were mixed across the board. Crude oil ended near two-month low as concerns over the global economy outweighed today’s encouraging reports about U.S. consumer confidence and housing prices [see also 5 Effective ETFs to Hedge a Frothy Stock Market].ETF Chart Of The Day #1: VXX
The Barclays iPath S&P 500 VIX Short-Term Futures ETN (VXX) was one of the best performers, gaining a whopping 7.93% during the session. As global concerns overshadowed positive U.S. data, the CBOE Volatility Index jumped above 15, forcing this ETF to surge during late afternoon trading hours. VXX settled at its high of $9.25 a share [see also Low Volatility ETFdb Portfolio].XHB
The State Street SPDR Homebuilders ETF (XHB) had a bumpy session today, slipping to close down 1.72%. A rise in U.S. housing prices for the month of July gave this ETF a boost during mid morning trading hours. But as disappointing Euro Zone headlines barraged the markets, XHB turned lower, tumbling to close just above its low of $25.14 a share [see also 8 Dividend ETFs Yielding 5% (And More)].
The State Street SPDR S&P International Dividend ETF (DWX) currently holds a dividend yield of about 7.3%, while its domestic counterpart SDY only provides a yield of 3.07%.
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Disclosure: No positions at time of writing.