Debt Woes Subdue Equities

by on July 20, 2011 | ETFs Mentioned:

Wall Street started the week in red territory as investors ran from equity markets after sky-high yields on Greek bonds sent waves of panic across all corners of the market. As expected, gold opened higher to start the week and the precious metal continued its upward march past $1,600 an ounce in the days following.

Corporate earnings kicked into high gear this week, and several industry giants have already caused quite a stir on the Street. Goldman Sachs left investors hanging after the investment banking behemoth missed analyst expectations, leading to a brief sell-off in the financial equities sector. Equity markets broadly ended higher on Tuesday as investors cheered on news of progress regarding debt-ceiling negotiations. Gold hit an all-time high of $1,610 an ounce on Tuesday while crude oil futures surged over $3 a barrel during the trading session, topping out at $99 a barrel before selling off back to $97 during Wednesday afternoon. Shares of Apple surged over 5% on Wednesday after the tech giant blew way past analyst expectations, generating a net income of $7.3 billion, more than double what the company earned in the year-earlier period.

Blowout earnings by Apple weren’t enough to ignite even a small rally in the tech sector and equity indexes finished fairly flat on Wednesday, confirming our belief that overarching concerns about the debt-ceiling are clearly holding back equity markets from charging higher. This week’s recommendations have put us in position to gain from an extended recovery in global equity markets while also protecting ourselves in case “safe-havens” outshine stocks.

Checking In: Trading Ideas

This week, our trading ideas included long positions in a domestic sector fund as well as an emerging market ETF, while our third holding was appropriately allocated to the international fixed-income corner of the market. A disappointing existing home-sales report coupled with mixed investor reactions amidst a generally upbeat corporate earnings season has left us with small gains for all of our recommendations.

Trading Idea #1: Long XLF

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