Leading ETFS (SPY, QQQ) Fall on Sneakily Dreary Economic News

Joel Anderson |

Modest market losses in the wake of the recently released economic data for the United States pushed down major equities ETFs. The Dow Jones Industrial Average was off nearly half a percent, the S&P 500 lost almost three-quarters percent, and the Nasdaq plunged over 1.25 percent. This lead to losses for the leading ETFs, with the SPDR S&P 500 ETF ($SPY) losing just over 0.75 percent, the PowerShares QQQ ETF ($QQQ) down over 1.25 percent, and the iShares Russell 2000 Index ETF ($IWM) falling just over 1 percent.

The response to the economic data could show many investors shifting to a risk-off environment in anticipation of greater volatility. The iPath S&P 500 VIX Short Term Futures ETF (VXX) gained over 1.5 percent, demonstrating anticipated volatility on the part of traders, and iShares MSCI Emerging Markets Index ETF (EEM) , which is typically viewed as a higher risk/higher reward trading option that hinges on sunny economic outlooks, fell almost 1.5 percent.

GDP Growth Good, but Low Spending Doesn’t Impress

At first blush, the numbers released by the Commerce Department on Thursday appeared to look pretty strong. The US economy grew at an annualized rate of 2.8 percent in the recently-ended quarter, making it an increase over the 2.5 percent pace from last quarter and well ahead of the expected 2 percent growth economists expected in a Dow Jones survey.

However, much of that growth can be attributed to businesses stocking their shelves, with growth coming in at just a 2 percent pace if one excludes increasing inventories. What’s more, the rate of consumer spending grew at just 1.5 percent, making it a tie with for the lowest spending growth since 2009. Together, these two considerations appear to have spooked some traders and investors regarding economic growth.

“It is deceptively weak,” said Alan MacEachin, corporate economist at Navy Federal Credit Union, of the economy. “You drill down below the surface, and you can see what’s going on.”

But What Does This Mean for QE?

The relatively weak economic data might also lead to some bounce-back, though, as it seems likely to continue delaying any tapering of the Federal Reserve’s quantitative easing program.

"Final household and business demand remain notably soft," said Peter Newland of Barclays (BCS) in a note to clients. "Policymakers will likely want to see a decisive pickup in the latter two before concluding that overall growth is on a sustainably stronger path."

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer


Symbol Name Price Change % Volume
BCS Barclays PLC 8.92 0.01 0.11 4,366,701
LGGNF Legal & General Group PLC (United Kingdom) 2.80 0.00 0.00 0


Emerging Growth

MGX Minerals Inc.

MGX Minerals is a diversified Canadian mining company listed on the Canadian Securities Exchange. MGX is engaged in the acquisition and development of industrial mineral deposits in western Canada that…

Private Markets

XY Find It

Founded by serial entrepreneur Arie Trouw, XY Findables follows a single guiding principle: customers should never lose anything important again. With over 50,000 users around the world, more than 100,000…

Cross Campus

With over 500 members and operating 80,000 square feet by summer 2016, Cross Campus is one of the country’s top ten shared, collaborative office or "coworking" operators in the US.…