Stocks are off to a shaky start this week as investors digested discouraging economic growth expectations from China. The Asian behemoth cut its growth goal down to 7.5%, previously at 8%, which inevitably caused concerns that spilled over onto Wall Street. The Nasdaq led the way lower, shedding 0.86% on the day, while the Dow Jones Industrial Average held its ground best, losing only 0.11%. Gold prices regained a bit of lost ground as equities inched lower; futures prices for the precious yellow metal settled near $1,705 an ounce as the trading session drew to a close [see ETF Insider: Did Wall Street Forget About Greece].
News of slower growth in China stole the headlines and economic data releases on the home front took a backseat on Monday. Investors payed little attention to the better-than-expected ISM non-manufacturing index results; growth in the domestic service sector came in at 57.3%, beating estimates of 55.5%, and surpassing last month’s reading of 56.8%. Factory orders data was disappointing as the figure came in at negative 1%, versus last month’s reading of positive 1.4%. Crude oil futures sank to a low of $105.50 a barrel in overnight trading, only to stage a come back and settle near $107 a barrel as Wall Street’s closing bell rang.
The Vanguard REIT ETF (VNQ) was one of the strongest performers, gaining 1.01% on the day, bolstered by bullish pressures all throughout the trading session. With no major economic or housing market data releases today, it’s hard to pinpoint a fundamental reason for why this ETF was able to trek higher while broad equity indexes drifted lower [see Examining Three Global Real Estate ETFs].
The iShares FTSE China 25 Index Fund (FXI) was one of the worst performers, shedding 2.73% on the day, as the fund gave into profit-taking pressures right from the opening bell. The Chinese government announced it was lowering its economic growth target from 8% down to 7.5%, with an emphasis on promoting higher-quality growth through internal consumption. This news is by no means terrible, although it certainly was discouraging enough to spark a broad-based sell off across global equity markets. Nonetheless, FXI is up an impressive 12% year-to-date [see Asia-Centric ETFdb Portfolio].
Disclosure: No positions at time of writing.