This Week In ETFs: July 30th Edition

by on July 30, 2010

This past week was a very active one for the markets as the summer earnings season focused in on the energy and defense sectors in order to give the market direction going forward. First, we saw oil giant BP report its quarterly earnings on Tuesday and announce that Tony Hayward would be stepping down from his position as CEO of the company. Despite the spill and the changing leadership, the company reported relatively good earnings with all things considered for the embattled oil giant. Later in the week, several other oil majors reported including Conoco Phillips and Exxon Mobil which both posted positive results thanks to a solid price for crude. However, market bellwether Boeing lagged behind and gave pause to investors who had considered the industrial and manufacturing sectors as ones most likely to lead the U.S. into a recovery. This bearish report combined with a lower than anticipated GDP growth number to strike fear into investors that the recovery may be slowing down, with our nation’s growth the lowest it has been in almost a year. Consumer confidence also came in at disappointing levels, further sinking investor sentiment which sent many to the relative safety of Treasury Bills and gold. Below, we profile a few of the most interesting stories that came out during this exciting week in the world of ETFs:

Analysis: ETFs May Be A Factor In Late-Day Market Volatility at Reuters:

In recent months, markets have seen volatile jumps in the closing minutes of certain trading days. While there were no obvious catalysts for these movements, some are blaming ETFs for the spikes in volatility. ETF trading now accounts for roughly 30% of daily volume in the market, which is three times as high as it was just five years ago. This increased trading volume may be a factor in the wild swings, as exemplified in the May 6th “Flash Crash” where ETFs accounted for many of the most impacted securities. The problem lies in rebalancing which greatly impacts daily leveraged funds in particular which are forced to sell and buy their positions on a daily basis in order to offer investors a leveraged daily return.

Exchange Traded Funds See Strong Asset Inflows in First Half of 2010 (GLD) at ETF Daily News:

For the first half of 2010, ETF assets fell by a modest 0.4%. However, during the same period, equity markets fell by a crushing 8.9%. Even with the slight loss on the first half of the year, ETF net inflows are still ahead of the pace they were at for the first half of 2009 and have shown amazing resilience considering the gloomy economic outlook. The article points to three key reasons why ETFs have had such a successful first half of the year; continued growth of fixed income ETFs, gold ETF assets reaching a new high, and the ‘Flash Crash’ failing to shake investor confidence in ETFs.

New ETF Tool: Stock Exposure On Demand at ETF Database:

ETF Database is proud to debut our brand new Stock Exposure Tool. The tool is a free resource with no membership requirements or limits on usage, and is easily accessible from our homepage. Investors are now able to type in the ticker of a specific stock and the results will show ETFs with the top weightings in that particular company. This tool will give investors the chance to quickly locate the ETF that lines up with their investment objectives or which funds may be the most impacted by a breaking news story about a specific company.

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Disclosure: No positions at time of writing.