Stocks and bonds finished last week markedly lower as rising interest rates and seasonal weakness crept back into the markets.
This coming week, the focus will be on the release of the monthly FOMC statement, along with a follow-up press conference from Federal Reserve Chair Janet Yellen on Wednesday.
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Here are key ETFs to watch for the week of Monday, September 15, 2014:
iShares High Yield Corporate Bond ETF (NYSE:HYG)
High-yield bonds have been weakening since the beginning of September and are now back below their 50-day moving average. A re-test of the August lows in HYG may lead to further selling across the entire junk bond spectrum.
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Many fixed-income experts have been concerned about the high valuations of these low credit quality securities and have been warning about a pullback for some time. The FOMC statement on Wednesday certainly has the potential to make an impact in this sector as well.
Vanguard REIT ETF (NYSE:VNQ)
Real estate has been one of the best performing sectors of 2014, with a gain of over 20 percent through the end of August. However, the recent jump in long-term interest rates has put significant pressure on this income producing asset class.
VNQ fell more than three percent last Friday on above-average volume and may be facing its first test of resolve this year. This ETF tracks 138 real estate investment trusts and is one to watch over the coming weeks as the interest rate trend unfolds.
Financial Select Sector SPDR (NYSE:XLF)
Financial stocks have been one of the bright spots in the equity markets and continue to trade much better than many other sectors. XLF has been showing excellent relative strength over the last several weeks and is still sitting close to its 2014 highs.
Bank of America Corp (NYSE:BAC) has been one of the leaders on the upside over the last six weeks and is a top holding in XLF. Despite negative headlines over significant mortgage-related fines, this mega-bank and related companies appear to be making a strong comeback this year.
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