Tag Archives: stocks

Junk Bond ETFs: A Trouble Zone

The year 2015 has so far been quite patchy for junk bond ETFs. The space delivered a listless performance in 2014 and continues to be a drag this year. Stubbornly low oil prices from the second half of the last year wrecked havoc on the space. The reason behind the massacre was that U.S. energy companies are highly tied to the high-yield bond market, with the former making up about 15% of junk bond issuance, per CNBC . Thus, fears of their default amid the oil price rout triggered the junk bond selloffs. Though oil prices staged a 25-year high, three-day rally at August-end, there was no relief for junk bonds and the related ETFs. Forget about relief, the Moody’s Liquidity Stress Index , which calculates the stress quotient in the high-yield bond market, rather grew to 5.1% in August from 4.3% in July. The rise in stress was the ‘highest since December 2010’, as the oil and gas sector witnessed a spike in negative revisions and defaults. Not only oil, the junk bond market has considerable exposure in another stressed investing area, metal and mining, per CNBC. S&P also downgraded seven high-yield oil and gas sector issuers last month and cited three defaults. As per MarketWatch , the high-yield sector underwent the cruelest month since last September. Moreover, the Fed emphasized the strong U.S. growth momentum in the second half of 2015 that alternatively hints at the start of policy tightening sometime this year. In fact, bets over the liftoff in this month’s Fed meeting is quite high at this point of time. The exit from the rock-bottom interest rate policy would raise yields on the treasury notes, thereby fading the sole lure of the high-yield bonds. If this was not enough, junk bonds are often considered equivalent to stocks. As the global stock market saw a tumultuous ride in August and investors embraced safe havens, junk bonds started to lose their appeal. As per industry experts, hazards in the overall commodity space spilled over to other asset-based junk bonds on general distaste for risk. In the past one-month period (as of September 2, 2015), junk bond ETFs, including the AdvisorShares Peritus High Yield ETF (NYSEARCA: HYLD ), the SPDR Barclays Capital High Yield Bond ETF (NYSEARCA: JNK ), the Guggenheim BulletShares 2020 High Yield Corporate Bond ETF (NYSEARCA: BSJK ) and the iShares Global High Yield Corporate Bond ETF (BATS: GHYG ), performed miserably. Original Post

Lipper U.S. Fund Flows: Net Outflows For Money Market Funds During Wild Week Of Trading

Lipper’s fund macro-groups (including both mutual funds and exchange-traded funds [ETFs]) had aggregate net outflows of $7.0 billion for the fund-flows week ended Wednesday, September 2. This activity represented the second consecutive week of overall negative net flows; investors took out $5.5 billion the previous week. Money market funds (-$10.3 billion) posted the largest net outflows among the macro-groups, bettered by municipal bond funds (-$586 million) and taxable bond funds (-$40 million). Equity funds, with net inflows of $3.9 billion, were the only group on the positive side of the ledger for the week. By Patrick Keon In what was a wild week of trading, the Dow Jones Industrial Average (+65.87 points) and the S&P 500 Index (+8.35 points) each managed to register gains of 0.4% for the week. Market activity for the week was bracketed by two days of superior results; the Dow and the S&P posted combined gains of over 4% on both the first and last trading days of the week. That was enough to offset the approximately 3% loss both indices suffered on Tuesday, September 1. Tuesday’s sell-off, which represented the third worst performance of the year for U.S. stocks, was triggered by continued fears about the economic situation in China. Additional poor economic data from China (its manufacturing purchasing managers index fell to a three-year low) again raised concerns that the world’s second largest economy was headed toward an extended slowdown. The U.S. markets rallied on the first and last trading days of the week on a combination of factors: strong U.S. economic data, rising oil prices, and China’s taking steps to calm its volatile market. U.S. second quarter GDP was revised sharply upward (to 3.7% from 2.3%), which gave rise to speculation the Federal Reserve could still impose an initial interest rate hike in September, despite the turmoil in China. Oil prices bounced during the week after an extended downturn left them at six-year lows. News of decreasing oil reserves was the cause for the rally, which saw the U.S. and global oil benchmarks (West Texas Intermediate Crude and Brent Crude) both appreciate more than 20% from their respective recent lows. Despite Tuesday’s activity, China’s moves to stabilize its market did have a positive impact around the globe. The U.S. market was buoyed at the start of the week by news that China planned to put in controls to limit the yuan’s weakening versus the dollar. The markets also closed the week strengthened by additional measures from China, which stated it would tighten trading rules on stock index futures and foreign exchange derivatives in an effort to solidify its market. The net outflows for the week from money market funds (-$10.3 billion) was only the third time during the third quarter the group had suffered losses. The positive flows performance this quarter has reduced the year-to-date net outflows for money market funds to approximately $40 billion. Institutional Treasury money market funds were responsible for the lion’s share of the week’s net outflows; $12.1 billion net left their coffers. For equity funds, ETFs accounted for all the net inflows (+$4.8 billion) for the week, while mutual funds saw net outflows of $865 million. The ETF activity was dominated by SPDR S&P 500 ETF Trust (NYSEARCA: SPY ), which took in over $7.2 billion of net new money. For mutual funds-in a continuation of this year’s trend-nondomestic equity funds (+$746 million) experienced positive net flows, while domestic equity funds (-$1.6 billion) saw money leave. It was a tale of two cities for taxable bond funds: ETFs took in $4.3 billion of net new money, while mutual funds experienced net outflows of $4.4 billion. The outflows were widespread on the mutual funds side, but Lipper’s High Yield Funds (-$714 million) and Loan Participation Funds (-$451 million) classifications were hit the hardest. The biggest contributors to the positive flows for ETFs were SPDR Barclays 1-3 Month T-Bill ETF ( BIL , +$845 million), iShares 1-3 Year Treasury Bond ETF ( SHY , +$698 million), and iShares 7-10 Year Treasury Bond ETF ( IEF , +$573 million). The $545 million of net outflows for municipal bond mutual funds marked their sixth straight week of outflows. Funds in Lipper’s national municipal bond fund classifications were responsible for $460 million of the outflows. Share this article with a colleague

New Leadership Emerging From These 2 Retail Groups

IBD research shows that stocks from the top 40 industry groups tend to outperform and that market corrections tend to usher in new leadership. Noteworthy stocks from the retail sector’s restaurant and auto parts groups have recently climbed into the top 40 ranks. Buffalo Wild Wings (BWLD) is hovering near a 195.93 buy point that it cleared in late July. Recent action can also be seen as a high handle on the base, with a potential 199.89 buy point.