ETF Outlook for Tuesday, June 10, 2014
iShares Dow Jones U.S. Regional Banks ETF (NYSE:IAT)
The strong sector Monday was the regional banks as they try and catch up to the rest of the market. IAT was up 1.5 percent to the best level since March and is now within striking distance of a six-year high that was set earlier this year.
The regional banks suffered a pullback as first quarter earnings were reported, but since that time the sector has bottomed out and it appears investors are ready to rotate money back into the sector.
Rydex CurrencyShares Euro ETF (NYSE:FXE)
After initially falling to a multi-month low after the ECB announcement last week, the currency rallied to close higher that day. However, the last two trading sessions have sent the euro to close at the lowest level since February.
As the markets digest the news that the ECB will continue with the current monetary policy and may even look for more stimulus, investors realize it will be difficult for the euro to move higher.
PowerShares Dynamic Biotech ETF (NYSE:PBE)
The ETF led all biotech ETFs on a day that involved a $3.85 billion deal for a little-known biotech stock, Idenix Pharmaceuticals(NASDAQ:IDIX). The purchaser was billion-dollar pharma company, Merck (NYSE:MRK), which is after a hepatitis drug that IDIX has been working on. IDIX was up 229 percent Monday and the small exposure that PBE had to IDIX was enough to send the ETF higher by 7.75 percent.
Other biotech ETFs did not gain as much as PBE, with the Market Vectors Biotech ETF (NYSE:BBH) closing down a few pennies Monday. This is a lesson on knowing what is under the hood of your ETF before you buy.
ProShares High Yield Interest Rate Hedged ETF (BATS: HYHG)
A 0.35 percent gain for HYHG Monday was not going to grab the attention of many investors. However the move put the ETF at the best closing high in over a month.
HYHG is an interesting fixed income ETF because it is long corporate junk bonds as well as short U.S. Treasury bonds. The combination has been working recently as junk bonds move higher in value and yields are starting to rise and therefore Treasuries are falling in value. On top of that the ETF pays a 4.6 percent annual dividend.
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