ETFs Eke Out Gains on Earnings, Fed (Daily ETF Wrap-Up)

Published July 21, 2009 at 4:00 a.m.

Market Wrap-Up

A barrage of second-quarter earnings and new assurances from the Fed on inflation left exchange-traded funds with modest gains Tuesday. Equities were essentially flat for most of the session as traders wrestled with results from several Dow components, airlines and technology companies, as well as the outlook for interest rates from the Federal Reserve.

Enthusiasm faded after a strong start despite better-than-expected results from blue chips, including Coca-Cola (KO), United Technologies (UTX), Merck (MRK) and Caterpillar (CAT). Federal Reserve Chairman Ben Bernanke said the Fed was prepared to leave the federal funds rate hovering near zero for an "extended period." The chairman also said the Fed had a plan for restoring rates over time as the economy improved.

By market close the Dow Jones Industrial Average added 68 points to 8916, while the Nasdaq Composite gained 7 points to 1916. The S&P 500 rose 3 to close at 955. For a detailed rundown on Tuesday's trading session see our market story.

Winners

Treasury bonds rose on word from the Fed that it has no intention of raising interest rates anytime soon. (Bond prices fall when interest rates rise.) That boosted ETFs that track Treasurys with longer-dated maturities. The iShares Barclays 20+ Year Treasury Bond Fund (TLT) added 2%, while Vanguard Extended Duration Treasury Index Fund (EDV) rose 2.5%.

Losers

Traders took profits out of the red-hot financials sector, which had been rallying on strong results last week from Goldman Sachs (GS) and JPMorgan Chase (JPM) as well as Monday's deal to rescue small-business lender CIT (CIT). An absence of such catalysts Tuesday caused the iShares Dow Jones US Financial Services Index Fund (IYG) to fall 1%, while the SPDR KBW Bank ETF (KBE) dropped 2.9%.

Tuesday's Industry Headlines

The Financial Industry Regulatory Authority softened its stance on leveraged ETFs, saying in a podcast that these investment vehicles "can be appropriate if recommended as part of a sophisticated trading strategy that will be closely monitored by a financial professional. At times, this trading strategy might require a leveraged or inverse ETF to be held longer than one day." In June FINRA issued a warning to advisors about holding leveraged ETFs for longer than one day, as compounding causes them to stray from their underlying benchmarks over time.

Wednesday's Notebook

Earnings and Conference Calls
AirTran Holdings, Alcon, Allegheny Technologies, Alliance Data, Altria Group, Amdocs Limited, BancorpSouth, Bank of New York Mellon, Boeing, Chipotle Mexican Grill, Cirrus Logic, Cohen & Steers, Delta Air Lines, Domino's, ETrade Financial, eBay, Eli Lilly, Equifax, Genzyme, GlaxoSmithKline, iRobot, KeyCorp, Lennox International, Logitech International, Northern Trust, Old Dominion Freight Line, P.F. Chang's China Bistro, PepsiCo, Pfizer, SanDisk, SunTrust, Tupperware Brands, U.S. Bancorp, VMware, Wells Fargo, Westell Technologies, Whirlpool, Wipro

Economic Data
7:00 a.m. MBA Purchase Applications
10:30 a.m. EIA Petroleum Status Report

A look at how the industry's most popular ETFs did on Tuesday:

10 Largest ETFs

Symbol	Net Assets	Price	52 Week High	52 Week Low	Volume
SPY	63,739	95.57	130.7	68.13	207,187,066
EFA	29,392	48.03	67.84	32.16	19,661,651
EEM	28,449	34.66	43.75	19.12	68,468,068
GLD	NA	93.13	97.24	70.14	9,357,291
IVV	18,337	95.79	130.92	68.24	3,604,789
QQQQ	14,025	38.18	48.32	25.51	122,619,466
IWF	9,479	42.73	55.45	30.49	5,344,873
SHY	7,044	83.84	85	82.52	1,071,709
VTI	10,258	48.06	65.56	33.75	2,463,969
IWD	7,068	48.73	70.64	34.22	1,856,718

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