Equity markets were dominated by back-and-forth trading last week as mixed economic data releases at home collided with interest rate cuts in China and Europe. On the homefront, investors expressed their concerns as ISM manufacturing data showed a slowdown, although better-than-expected factory orders did offer some relief before the 4th of July holiday break for markets.
When trading resumed on Thursday, however, selling pressures became the dominant force as investors were quick to take profits following the ECB rate cut, which many viewed as a sign that economic growth expectations for the region are even grimmer than previously thought. Friday's employment report at home only added to the already towering list of uncertainties; the unemployment rate remained unchanged at 8.2% although the nonfarm payrolls figure missed analyst estimates by 20,000, coming in at 80,000 for the month of June. This week will be stacked with major economic data releases on all fronts, including FOMC minutes as well as China GDP.
1. SPDR Gold Trust (GLD)
Watch GLD Because: This physically-backed ETF offers exposure to the spot price of gold bullion. Gold prices have a history of making big swings whenever the Fed, or Chairman Bernanke, offers insights and economic commentary. As such, GLD could see a surge in trading volumes on Wednesday following the latest Fed minutes. This news release will shed light on the domestic economic recovery by offering commentary from the previous Fed meeting, during which officials agreed to extend "Operation Twist." GLD may be in for a wild trading day as investors either increase their risk appetites or flee for the safe havens, depending on how markets react to the Fed's outlook and commentary.
2. FTSE China 25 Index Fund (FXI)
Watch FXI Because: This ETF measures the performance of the 25 largest companies in the China equity market. China's GDP is slated to come out Thursday evening, which puts FXI in focus on Friday morning at the opening bell. This ETF may very well gap in either direction depending on how investors react to the economic news overnight. Although it's extremely popular among active traders, investors should note some of the inherent drawbacks associated with this ETF. First and foremost, the top ten holdings in FXI receive nearly two-thirds of total assets, increasing the company-specific risk associated with this product. Also, FXI is dominated by financial services companies, making it less than ideal for those who wish to establish diversified exposure over the long haul. Analysts are expecting for China's economic growth to come in at 7.7% on a year-over-year basis, compared to the previous reading of 8.1%.
3. Market Vectors Retail ETF (RTH)
Watch RTH Because: This ETF tracks an index which is comprised of the 25 largest U.S. listed, publicly-traded retail companies. Domestic consumer discretionary stocks, and retailers in particular, will come into the spotlight on Friday morning as the latest University of Michigan consumer sentiment data hits the street. Analysts are expecting for this figure to come in unchanged at 73.2, while a surprise to the upside would surely welcome buying pressures given the largely gloomy economic backdrop. Top holdings in RTH include: Wal-Mart (WMT), Amazon (AMZN), Home Depot (HD), CVS (CVS) and Lowe's (LOW).
Disclosure: No positions at time of writing.
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