Markets took their cue from Ben Bernanke today, as the chairman commented on the Fed’s monetary policy before the Senate’s Joint Economic Committee in Washington. Though Bernanke stated that the central bank will continue its current stimulus measures, he indicated that changes may be made, but when they will happen, he simply “does not know.” The latest FOMC minutes reported today also reflected this sentiment, stating that a number of participants this month favored tapering the central bank’s $85 billion per month bond-buying program as early as the June meetings. Bernanke and the FOMC did, however, stress that no changes would be made without sufficient evidence of strong and sustained economic growth [see The Cheapest ETF for Every Investment Objective].Global Market Overview: TLT Tumbles On Fed Tapering Fears, XLB Slumps
Following Bernanke’s testimony and the release of the latest FOMC minutes, all three major U.S. equity indexes fell to close in negative territory. The S&P 500 ETF (SPY, A) lost 0.74%, after its underlying index was up as much as 1% earlier in the session. The Dow Jones Industrial Average ETF (DIA, B) slipped 0.44%, while the tech-heavy Nasdaq ETF (QQQ, A-) fell 0.90%.
In Europe, markets were broadly higher; the Stoxx Europe 600 rose 0.2% to a yearly high. Meanwhile, Asian markets were mixed: Japan’s Nikkei Stock Average popped 1.6%, while China’s Shanghai Composite Index edged 0.1% lower.
Bond ETF Roundup
U.S. Treasuries reacted quickly after Bernanke’s testimony, sending yields above 2% for the first day since mid-March. Yields on 10-year notes rose 10 basis points, while 30-year bond and 5-year note yields fell 8 and 7 basis points, respectively [see also Seven Simple & Cheap ETF Model Portfolios].
Crude oil futures fell once again today, settling well below $95 a barrel, as supply data and the possible tapering of QE weighed heavily on the commodity; the U.S. Energy Information Administration reported that crude supplies declined by 300,000 barrels for the week ended May 17. Meanwhile, gold erased earlier gains after Bernanke’s commentary boosted the dollar.
ETF Chart Of The Day #1: (TLT)
The Barclays 20 Year Treasury Bond Fund (TLT, A-) was one of the worst performers today, shedding 1.49% during the session. As U.S. Treasury prices dropped after the latest Fed commentary, this ETF took a steep tumble in the early trading hours. TLT inched lower throughout the day, eventually settling at $116.09 a share [see King Dollar ETFdb Portfolio].
ETF Chart Of The Day #2: (XLB)
The Materials Select Sector SPDR ETF (XLB, A) also posted a weak performance today, shedding 1.36% during the session. Materials shares were among today’s weakest performers, forcing this ETF to tumble during the afternoon hours. XLB eventually settled at $40.69 a share [see Kitchen Sink ETFdb Portfolio].
ETF Fun Fact Of The Day
The best-performing retirement strategy over the trailing 5-year period has been the free ETF newsletter]
Disclosure: No positions at time of writing.
- Ben Bernanke