On the bright side, the month of May is now in the books and it is fair to say the "sell in May and go away crowd" did not inflict much damage. After all the S&P 500 rose 2.1 percent for the month, marking the seventh straight monthly increase for the benchmark U.S. index. Unfortunately, for the bulls, there was some selling in May.
At least late in the month. In the final week of the month, the S&P 500 lost 1.1 percent while the Dow Jones Industrial Average shed 1.2 percent. A spike in 10-year Treasury note yields ignited long-standing fears about rising interest rates. That chased investors from favored yield sector hideouts such as staples and utilities.
Among the other asset classes that incurred damage last week were U.S. high-yield bonds and emerging markets. Combine that with the fact that several Federal Reserve members give speeches this week, possibly stoking more fears about the end of quantitative easing, and plenty of ETFs will be in focus this week.
SPDR Barclays High Yield Bond ETF (NYSEARCA:JNK)
Last week, JNK and its larger rival, the iShares iBoxx $ High Yield Corporate Bond Fund (NYSEARCA:HYG) saw combined outflows of $660 million, CNBC reported, but that does not tell the entire story. Not including Friday, the two ETFs bled a combined $1.5 billion in assets last month even as issuance of high-yield bonds soared.
There is evidence to support the notion that investors are trading out of HYG and JNK to move down the yield curve to lower duration fare. That is not the only problem for JNK, though. The aforementioned new issuance may be a case of too much supply at a time when demand of junk bonds is waning.
JNK makes the list because its tracking error is higher compared to HYG, meaning when pros look to short a junk bond ETF, JNK is usually the first option. Adventurous traders can give the ProShares Short High Yield (NYSEARCA:SJB), the inverse answer to HYG, a look.
PowerShares DB Dollar Bullish (NYSEARCA:UUP)
In more sanguine market environments, non-leveraged currency ETFs or those that do not offer exposure to the Japanese yen usually are not that exciting. However, things have been getting interesting for UUP, at least by the standards of what is normally a fairly docile ETF. Inflows of $54.8 million last month, good enough for the fifth spot in the expansive PowerShares lineup, indicate as much.
Three reasons to keep an eye on UUP this week: First, the aforementioned Fed speeches. Second, a spate of key economic data points out of the U.S. and Eurozone. Third, persistent weakness in the Australian dollar and other riskier currencies.
Vanguard FTSE Emerging Markets ETF (NYSEARCA:VWO)
Investors can take their pick of which emerging markets are a mess right now. That list includes Brazil and nearly every other Latin American market. Add Turkey to the list and do not forget about some of the previously high-flying Asian tigers.
VWO's inclusion on this week's list does not mean the ETF is being picked on. If anything, there is a high point with this ETF and that is the fund's lack of South Korea exposure. Still, with so many emerging markets struggling, it is hard to be bullish on any diversified ETF tracking this asset class.
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