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ETF Trading Report: Defense, Bond ETFs In Focus

Eric Dutram

U.S. stocks faced a rough session to open the week as European issues once again were the main concern in the marketplace. Today, it was mostly focused on Spain, as yields for the country’s benchmark 10 year debt briefly hit 7.5% while the nation also announced that it was banning short-selling on all its stocks.

Thanks to this, many European exchanges were down more than 2% on the day while U.S. stocks also started the day deep in the red although they did manage to recoup some of their losses on the session. Still, the Dow finished lower by 0.8% while the S&P 500 slumped by 0.9% and the Nasdaq led the big three lower, losing 1.2% on the session (read Three Defensive ETFs for a Bear Market).

In terms of sectors, investors saw weakness across the board with big losses coming in the banks, big tech, and materials. A few winners were seen in some of the telecom names while a few of the staples also managed to hold up better than most as well.

However, thanks to this risk off sentiment, the ten year Treasury bond continued to fall, going below the 1.45% level while the dollar index rose modestly on the day. Meanwhile in commodities, crude was a big loser, falling by about 4%, while the rest of the space also saw weakness in the tumultuous session (see Top Commodity ETFs in this Uncertain Market).

ETF trading was somewhat light, although a number of products did see volume in line with their averages. Gold investments continued to see lower volume levels, although European and bond ETFs were big movers on the day.

One product in particular which attracted a great deal of interest was the iShares Dow Jones US Aerospace & Defense ETF (ITA). The product saw volume that was roughly triple the daily average, although it did slump about 1.3% on the day (read Can The Defense ETFs Soar Despite Headwinds?).

The fund seems to be in focus thanks to the broad slowdown and fears over cuts in spending both in the U.S. and the broad European aerospace and defense markets. These worries, along with the fact that all five of the fund’s top holdings are reporting before the end of the week, helped push this ETF to a higher-than-normal trading level during Monday’s session.

Another fund which saw a great deal of interest was the iShares Barclays 3-7 Year Treasury Bond Fund (IEI). The product usually sees about half a million shares move hands during a normal session but interest spiked to just over 2.3 million during today’s trading.

Interestingly, the fund was pretty much flat on the day, although bond investing is clearly more in focus thanks to worries over a global slowdown and higher demand for safe havens. It is also worth noting that a great deal of the volume came in the form of three block trades as 1.8 million shares moved hands in just three blocks that were relatively spread out across the day.

(see more in the Zacks ETF Center)

Author is long ITA.

Read the analyst report on IEI

Read the analyst report on ITA

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