Daily ETF Roundup: UNG Slides On Mild Weather, XHB Rises On Construction Report

by on February 16, 2011 | ETFs Mentioned:

Despite a rough stretch in morning trading thanks to tensions in the Middle East, U.S. stocks managed to finish the day on a high note thanks to a rosy economic forecast from the Fed. The Dow gained 62 points on the day while the S&P 500 and the Nasdaq gained, respectively, 0.6% and 0.8% in the session. Among the biggest winning sectors on the day were oil equipment firms as well as a host of technology companies that were boosted by strong data as well. Meanwhile, commodities also trended into the green as well with gold gaining one dollar an ounce and oil rising by about 70 cents a barrel. These gains in the commodity markets came thanks to a weaker dollar which fell by about 0.5% on the day against its major rivals, helping to push soft commodities up once again in today’s trading session.Two reports were key to trading in Wednesday as bad news was soon overshadowed by more optimistic reports closer to home. First, news spread that Iran was sending warships to Syria through the Suez Canal, angering Israel and raising the possibility of a conflict between the increasingly hostile regional powers. As a result, both oil and gold shot up immediately after the report but soon tapered off after traders realized that a conflict was not imminent. This gloomy report was soon overshadowed by the release of the Federal Reserve minutes in which the Fed raised their growth forecast to a range of 3.4%-3.9% from their previous expectation of between 3% and 3.6%. This report, along with continued M&A activity across the market, pushed stocks up to end the day and helped to erase much of the losses in many of the previous sessions.

One of the biggest winners in the ETFdb 60 was State Street’s S&P Homebuilders SPDR (XHB) which rose by 1.8% on the day. Components of this homebuilder focused ETF rose thanks to a solid construction report for the month of January. In the data release, new home starts rose 14.6% to an annual rate of 596,000, a reasonable increase over the December figures of 520,000 and more than 50,000 better than analysts had expected. In fact, according to data from Yahoo, manufactured housing was the day’s best performing industry, gaining 4.4% in the session suggesting that the fortunes of the housing industry may finally be turning around [see holdings of XHB here].

One of the biggest losers in the ETF world today was the United States Natural Gas Fund (UNG) which fell by 2% in Wednesday trading. The fund tracking futures contracts of the popular heating fuel was one of the biggest losers in today’s reading of the ETFdb 60 thanks to mild weather across much of the U.S., a factor which looks likely to limit the demand for heat and thus, by extension, natural gas. Traders had been hoping for a continued cold patch to produce extensive drawdowns of the fuel in the weeks ahead in order to finally push up prices of the beaten down fuel. However, this was not the case as 50 degree weather in Chicago and New York City threw any hopes of future large reductions in supplies out the window. Thanks to this, UNG continued its recent slide, it is now down by 11.7% over the past month and 26.2% over the past half year period [see fundamentals of UNG here].

Disclosure: No positions at time of writing.