Tuesday was an interesting day on Wall Street, as investors reacted to the unveiling of a controversial bailout plan, a welcome rise in home prices, and a major setback for comprehensive health care reform. The Dow eked out a gain thanks largely to a rally in IBM shares, but most broad-based indexes were down. The ETFdb 60 Index, a benchmark that includes the entire universe of assets available through exchange-traded products, dropped 4.92 (0.5%) to close at 999.51. Tuesday marked the third consecutive losing session and a monthly low for the benchmark.
Decliners were led by the iShares MSCI Brazil Index Fund (EWZ) which slipped about 3% on weakness from metals and telecom companies. Most analysts attributed the daily decline to profit taking, expressing continued confidence in a bull market rally that has pushed EWZ up more than 100% so far in 2009. Brazil’s Central Bank President Henrique Meirelles said on Tuesday that the government anticipates a weak recovery from global markets, admitting that a W-shaped recovery is within the realm of possibility. Meirelles indicated that Brazil is prepared to combat such a situation.
Last week, Brazil spooked international investors when it announced a foreign investment tax, but the news ultimately did little to diminish long-term confidence in the emerging market.
Among the ETFs finishing higher on Tuesday was the Vanguard Long-Term Bond ETF (BLV), which gained 1.4%. A surprise decline in consumer confidence sent yields, which were near two-month highs, sharply lower as investors suddenly lost their risk appetite. Tuesday also saw strong demand for the sale of $44 billion in two-year Treasuries. BLV is down slightly for 2009, although the fund has posted gains of more than 15% over the last 52 weeks.
Disclosure: No positions at time of writing.