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ETF Trading Report: Consumer, Large Cap ETFs In Focus

Eric Dutram

Although markets started Monday trading on a down note, stocks rebounded in the afternoon part of the session, leading the major indexes back to breakeven on the day. Overall, the Dow finished in the red by 0.1% while the other two major indexes finished in the green with the S&P 500 squeaking by with a one point move higher and the tech-heavy Nasdaq adding close to 0.5% to open the week.

This rocky session came on the back of weak data from both of the world’s major markets, the U.S. and China. America saw factory orders decline while China saw services show weakness as the non-manufacturing PMI fell to 55.2 down from 56.1 in April.

Both of these releases suggested more weakness in the global economy, leading many investors to sell-off stocks in the process. However, more speculation over central bank intervention in the markets helped spur some late session buying as hopes over a third round of QE are beginning to reach a fevered pitch.

With this backdrop, defensive names led on the day, boosted by strong performances in the health care and consumer goods sectors as well as strength in the utilities segment. On the other side, banking continued to be weak while industrials and some energy names sputtered to open up the first full week of June (see Inside The Forgotten Energy ETFs).

Bond and currency trading was also mixed as the dollar fell a tad against many of the world’s major currencies, pushing the greenback below the 82.6 mark in the dollar index. Meanwhile, bond yields rose across the board in Monday trading with the 10 year adding about seven basis points while the 30 year added four basis points to finish at a 2.56% yield.

Meanwhile, commodities finished broadly higher in Monday trading led by solid performances in the energy space. Many softs also added in Monday’s session although there was some weakness in the precious metals and a few of the grains to open up the week.

In ETF trading, volume was high across the board led by strength in many of the leveraged products as well foreign-focused ETFs. Beyond this, there was less interest in a number of U.S. financial ETFs, as well as some of the style box products on the day that focus on the mid cap segment.

In particular, the large cap blend ETF space was a hot place for assets in Monday trading, led by outsized volumes in the iShares S&P 1500 Index ETF (ISI). This product usually sees volume of just 21,400 shares in a normal session but saw a spike to nearly 550,000 shares to start the week (see Ten Biggest U.S. Equity Market ETFs).

The vast majority of this volume came in the morning as a block of over 400,000 shares changed hands followed shortly by another block approaching the 125,000 mark. This left paltry volume for the rest of the day and suggested that much of the interest in this product came from large traders seeking to position themselves in the large cap blend space.

In fact, other large cap blend ETFs also saw outsized trading volumes with many experiencing trading activity that was more than double the norm. Given this, the large cap blend space could be one worth watching in the days ahead as more economic data is released across the globe.

In terms of sectors, investors saw a great deal of interest in a number of consumer ETFs but especially in the case of the Guggenheim S&P Equal Weight Consumer Discretionary ETF (RCD). This product usually sees volume of just 12,500 shares but saw a spike to nearly 200,000 in Monday’s session.

Interestingly, the vast majority of this activity came in the form of a huge block trade in the early afternoon. In this period a block of 171,000 shares changed hands and accounted for much of the day’s volume. In fact, there was a period of more than 90 minutes when the fund did not trade at all (read Lower Wal Mart Exposure With These Three ETFs).

This outsized trading activity seemed to be a theme in the consumer space during Monday’s session as a number of other ETFs in this space saw outsized volume as well. However, all of these spikes paled in comparison to RCD although investors did see a great deal of activity in the more ‘active’ or narrowly focused funds in this segment.

(see more on ETFs at the Zacks ETF Center)

Read the analyst report on ISI

Read the analyst report on RCD

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