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Rising Rate Fears Keep Stock ETF Action Volatile


The equities markets and stock exchange traded funds experienced a tumultuous week on fears that central banks will cut back on their stimulus measures.

The week started off quietly enough, but the lack of additional stimulus plans out of the Bank of Japan sent the Nikkie spiraling downward, which also renewed fears over the potential Fed tapering back in the states.

On Thursday, the markets booked its second-best session of the year on the better-than-expected labor market data, with lower jobless claims over May, and higher retail sales numbers.

Right now, U.S. stocks are stuck in volatile action as investors weigh positive economic growth with potential cut backs in Fed quantitative easing.

“We’re hitting a period of higher volatility,” Bryan Novak, a manager at Astor Asset Management LLC, said in a Bloomberg article. “Interest rates need to rise, but while you have an economic picture, where growth is around 2 percent, you don’t have a lot margin of error to work with in terms of interest rates. That has a meaningful impact on the futility of the economy at this point. The market is going to focus heavily on every word that the Fed says.”

The major U.S. equity indices, the S&P 500 was on track for a weekly decline of 1.2% in afternoon trade Friday, the Dow Jones Industrial Average decreased 1.3% and the Nasdaq Composite dropped 1.6% for the week.

Gold futures were trading around $1,387 on Friday, and the SPDR Gold Shares (GLD) was 2.0% lower for the week. Oil futures rose Friday, trading at $97.8 per barrel. The United States Oil Fund (USO) gained 2.1% over the week.

In the bonds market, the iShares 20+ Year Treasury Bond (TLT)  was down 1% over the last week.

Top performing non-leveraged ETFs over the past week include the WisdomTree Japan SmallCap Dividend Fund (DFJ) up 6.5%, iShares MSCI Japan Small Cap Index Fund (SCJ) up 6.4% and the SPDR Russell/Nomura PRIME Japan ETF (JPP) up 6.2%.

The worst performing non-leveraged funds include the Market Vectors India Small-Cap Index ETF (SCIF) down 9.2%, Market Vectors Indonesia Small-Cap ETF (IDXJ) down 9.0% and Junior Gold Miners ETF (GDXJ) down 8.9%.

Next week, investors should keep an eye out for the consumer price index and housing starts report Tuesday. Additionally, existing home sales data will come out Thursdays. More importantly, the FOMC meeting announcements will be given Wednesday.

For more information on the broad markets, visit our S&P 500 category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.