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Despite An Uptick In Equities; Fund Investors Remain Risk Adverse

By Tom Roseen Generally ignoring mixed economic news, equity investors continued to follow the lead of oil prices throughout the fund-flows week ended March 2, 2016. On Thursday, February 25, markets rallied, with the Dow Jones Industrial Average posting a 212-point gain after investors learned that Venezuela’s oil minister had said he was meeting next month with other oil ministers, with a goal of stabilizing oil prices. Technology and financial issues led the rally as investors took a risk-on approach, helped by news of a jump in durable goods orders; investors ignored the details that shipments of nondefense capital goods excluding aircraft were negative and that the Shanghai Composite dropped 6.4% for the day. Throughout the flows week investors cheered the comments of St. Louis Federal Reserve President James Bullard, who reiterated that the pressure to raise interest rates has eased. Preliminary Q4 2015 GDP growth was revised upward during the week to 1.0%, which helped offset a dip in oil prices on Friday. Despite better-than-expected earnings reports from the likes of J.C. Penney and Kraft Heinz, investors continued to bid up gold. On Monday, February 29, investors continued to push up utilities issues and gold prices, underscoring the markets’ continued volatility. Nonetheless, oil futures rose sharply on reports of a possible production freeze, and investors’ global economic fears declined slightly after China lowered its reserve-requirement for that nation’s banks. On Tuesday stocks rallied, with investors bidding up financial and technology stocks on news that oil prices had jumped higher and that the ISM Manufacturing Index rose to 49.5% for February; while still in contraction territory, that beat consensus estimates. The NASDAQ Composite witnessed its largest one-day gain since August 2015 as utilities and Treasuries took a breather. Another strong gain in oil prices on Wednesday pushed stocks into the black once again. Investors met the “Goldilocks” news from the Federal Reserve’s Beige Book with a sigh of relief; it hinted that the central bank might be slow to raise interest rates this year, while showing the economy is still growing. This rally pushed the ten-year Treasury yield to its strongest closing high since February 5. Despite the risk-on attitude by many investors this past week, risk aversion remained the mantra of fund investors. For the week fund investors were net purchasers of fund assets (including those of conventional funds and exchange-traded funds [ETFs]), injecting a net $6.4 billion for the fund-flows week ended March 2. The increase in recent market volatility pushed investors toward safe-haven plays and fixed income securities, padding the coffers of money market funds (+$5.7 billion net), taxable bond funds (+$2.9 billion net), and municipal bond funds (+$0.2 billion net), while being net redeemers of equity funds (-$2.4 billion). For the first week in five equity ETFs witnessed net inflows; however, this past week they took in just $450 million. As a result of rises in oil prices and good economic news during the week, authorized participants (APs) were net purchasers of domestic equity ETFs (+$1.5 billion), injecting money into the group for the first week in three. Despite a slight improvement in the global markets, APs-for the fifth consecutive week-were net redeemers of nondomestic equity ETFs (-$1.0 billion). Perhaps as a result of persistent risk aversion, accompanied by the rally in technology firms, APs bid up some unlikely names, with the SPDR Gold Trust ETF (NYSEARCA: GLD ) (+$1.1 billion), the PowerShares QQQ Trust ETF (NASDAQ: QQQ ) (+$0.6 billion), and the iShares U.S. Real Estate ETF (NYSEARCA: IYR ) (+$0.3 billion) attracting the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum, the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) (-$1.2 billion) experienced the largest net redemptions, while the iShares MSCI Japan ETF (NYSEARCA: EWJ ) (-$362 million) suffered the second largest redemptions for the week. For the third week in four conventional fund (ex-ETF) investors were net redeemers of equity funds, redeeming $2.8 billion from the group. Domestic equity funds, handing back $2.9 billion, witnessed their fourth consecutive week of net outflows, while posting a weekly gain of 3.32%. Meanwhile, their nondomestic equity fund counterparts, posting a 3.69% return for the week, witnessed net inflows (although just +$87 million) for the fifth consecutive week. On the domestic side investors lightened up on large-cap funds and equity income funds, redeeming a net $1.6 billion and $1.0 billion, respectively. On the nondomestic side international equity funds witnessed $362 million of net inflows, while global equity funds handed back some $274 million net. For the third week in four taxable bond funds (ex-ETFs) witnessed net inflows, taking in a little under $2.0 billion. High-yield funds witnessed the largest net inflows, taking in $2.6 billion (for their second consecutive week of net inflows), while government-mortgage funds witnessed the second largest net inflows (+$0.4 billion). Corporate investment-grade debt funds witnessed the largest net redemptions from the group, handing back $754 million for the week. For the twenty-second week in a row municipal bond funds (ex-ETFs) witnessed net inflows, taking in $125 million this past week.

ETFs For Quick Profits From The Oil Rebound

Oil has been showing immense strength in recent weeks with prices bouncing from their recent lows. In fact, the price of oil jumped over 9% last week, with U.S. crude currently hovering above $36 per barrel and Brent oil trading above $39 per barrel at the time of writing. With this, U.S. crude prices are up nearly 33% and Brent oil is up 27% from their 12-year lows hit in mid-February. Inside The Surge The impressive gains came on the back of improving demand/supply dynamics, which are rebuilding investors’ lost confidence in the rebalancing of the oil market. First, talks over a deal by major oil producers to freeze oil output at the January level infused an air of optimism. Second, output from the Organization of the Petroleum Exporting Countries (OPEC) dropped by 79,000 barrels per day last month while U.S. production slipped by 25,000 barrels per day for the week ending February 26. The positive weekly data from oil services firm Baker Hughes (NYSE: BHI ), which showed that the number of rigs fell to the lowest level since December 2009, also supported the rally in oil price as it reflects that U.S. output will continue to decline in the coming weeks. Finally, the International Energy Agency (IEA) projects a sharp decline in oil production to 4.1 million barrels a day over the 2015 through 2021 period from 11 million barrels a day during 2009-2015. This is because a slew of capital spending cuts last year and another round of major cuts this year will continue to curb oil production and reduce global supply, and thereby lead to higher oil prices. On the demand front, the global outlook is looking bright. Abating fears of a recession in the U.S. following the recent encouraging data, and renewed optimism of growth in China, Europe and Japan could drive oil demand in the coming months. Given the fresh round of optimism and signs that the oil market may begin to tighten, many investors have turned bullish on the energy sector and are seeking to tap this opportunity. How to Play? For them, a leveraged play on energy could be an excellent idea as these could lead to huge gains in a very short time frame when compared to the simple products. Below, we have highlighted five leveraged energy ETFs that could be excellent picks for investors seeking to make large profits from the energy space in a short span: Direxion Daily Energy Bull 3x Shares ETF (NYSEARCA: ERX ) This fund creates a triple (3x or 300%) leveraged long position in the Energy Select Sector Index while charging 95 bps in fees a year. It is a popular and liquid option in the energy leveraged space with AUM of $545.2 million and average trading volume of 4.2 million shares. The ETF gained 20.1% over the past one week. ProShares Ultra Oil & Gas ETF (NYSEARCA: DIG ) This ETF seeks to deliver twice (2x or 200%) the daily performance of the Dow Jones U.S. Oil & Gas Index. It has been able to manage $151.4 million in its asset base with trades in a good volume of more than 302,000 shares per day on average. The product was up 12.9% in the same time frame. Direxion Daily S&P Oil & Gas Exploration & Production Bull 3x Shares ETF (NYSEARCA: GUSH ) This fund offers triple exposure to the daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index. It has accumulated $47.7 million in its asset base since its inception in late May 2015. Average daily volume is solid at around 913,000 shares while expense ratio is 0.95%. The product gained 57.7% over the past five trading sessions. ProShares Ultra Oil & Gas Exploration & Production ETF (NYSEARCA: UOP ) This product also tracks the S&P Oil & Gas Exploration & Production Select Industry Index, but offers twice the returns of the daily performance with the same expense ratio as that of GUSH. It has AUM of just $0.8 million and trades in a paltry volume of 2,000 shares. UOP was up over 28% in the same time frame. Direxion Daily Natural Gas Related Bull 3x Shares ETF (NYSEARCA: GASL ) This product seeks to deliver thrice the daily performance of the ISE Revere Natural Gas Index, which derives a substantial portion of its revenues from the exploration and production of natural gas. The fund has amassed $55.1 million in AUM and trades in heavy average daily volume of 2.2 million shares. Expense ratio comes in at 0.95%. The fund delivered whopping returns of 88.6% in the past five trading sessions. Bottom Line As a caveat, investors should note that these products are extremely volatile and suitable only for short-term traders. Additionally, the daily rebalancing – when combined with leverage – may make these products deviate significantly from the expected long-term performance figures. Still, for ETF investors who are bullish on the energy sector for the near term, either of the above products can be an interesting choice. Clearly, a near-term long could be intriguing for those with high-risk tolerance, and a belief that the “trend is the friend” in this corner of the investing world. Original Post

Apple Making The Perfect Smartphone For Donald Trump

For people with big hands — or who claim to have them, like Republican presidential candidate Donald Trump — Apple ( AAPL ) is working on a 5.8-inch smartphone. It’s “yuge,” as Trump would say. The Motley Fool and other news websites, citing a prepublication note from Taiwan-based tech publication DigiTimes, said that Apple plans to launch the 5.8-inch iPhone as early as next year, but more likely 2018. Apple currently sells iPhones in screen sizes of 4, 4.7 and 5.5 inches. The largest model is designated as Plus, with the iPhone 6S Plus being the latest handset in that class. The jumbo-screen iPhone would use an AMOLED (active-matrix organic light-emitting diode) display, which allows for thinner, more power-efficient displays than current LCD screens. AMOLED screens also boast more vivid colors, deeper blacks, better contrast and higher color saturation. Possible suppliers of the AMOLED screen include Samsung Display, LG Display ( LPL ) and Japan Display, DigiTimes said. If Apple launches the AMOLED screen smartphone in 2018, it would likely be called the iPhone 8, given the company’s naming pattern. Apple’s use of AMOLED displays would benefit Coherent ( COHR ), a maker of laser systems used in the manufacturing of technology including flat-panel displays, says Stifel Nicolaus analyst Patrick Newton. On Tuesday, Newton reiterated his buy rating on Coherent and raised his price target to 100 from 82 on the expected rise in demand for organic light-emitting diode, or OLED, displays in smartphones and other devices, Barron’s reported . Another likely beneficiary of Apple’s use of AMOLED displays would be Universal Display ( OLED ), which develops OLED technology. No word on what the 5.8-inch iPhone would be called. But to interest Trump — who defended the size of his hands on the campaign trail after taking a jab on that, of all topics, from rival candidate Marco Rubio — the new monster iPhone might have to come in gold. RELATED: Apple iPhone Demand ‘Soft’; Stock Gets Price Target Cut Apple Working On Dual-Camera iPhone 7 Plus Smartphone: Analyst .