Jobs Data, Outlook for Dollar Sink ETFs

Stocks started weak and kept falling Wednesday after new jobless claims rose unexpectedly last week, breaking three consecutive weeks of improving results. The early slide was accelerated by a rise in the dollar that depressed commodity-focused exchange-traded funds.

The Dow Jones Industrial Average closed down 204 points to 9509, a 2% drop for the day. The Nasdaq slipped 65 points to 2057, and the S&P 500 ebbed 27 to 1029. The Dow had closed Wednesday with its best quarterly gain since 1998, up 15% for the third quarter.

Federal Reserve Chairman Ben Bernanke began the market session testifying on Capital Hill, urging reform of financial regulation. His comments on concerns about the stability of the dollar and its status as the dominant world reserve currency were followed by an accelerated slide in the major indexes, already trading down after the jobless data.

"I also agree with [World Bank President Robert Zoellick], though, that if we don't get our macro[economic] house in order that that will put the dollar in danger, and that the most critical element there is long-term fiscal stability," he said.

Most of Bernanke's day on the Hill was spent pushing for greater regulation of the financial services sector.

"The current financial crisis has clearly demonstrated that risks to the financial system can arise not only in the banking sector, but also from the activities of other financial firms – such as investment banks or insurance companies – that traditionally have not been subject to the type of regulation and consolidated supervision applicable to bank holding companies," he said in an opening statement to the House Committee on Financial Services. "To close this important gap in our regulatory structure, legislative action is needed that would subject all systemically important financial institutions to the same framework for consolidated prudential supervision that currently applies to bank holding companies."

The Commerce Department said initial claims for jobless benefits rose 17,000 to 551,000 in the week ended Sept. 26. The jump was more than three times economists' earlier estimate of an increase of 5,000 new claims.

The national unemployment rate for last month is scheduled to be released Friday.

For a detailed rundown on Thursday’s trading session see our market story. 

Betting big and leveraged against the financial services sector paid off Thursday, as the Direxion Daily Financial Bear 3X Shares fund (FAZ) rose 11.7%. Investors also headed for safer havens, pushing the iShares Barclays 20+Year Treasury Bond fund (TLT) up 1.4%.

The SPDR S&P Metals & Mining fund (XME) dropped 4.6%, as commodity prices slipped against the strengthening dollar. The SPDR KBW Bank (KBE) dropped 4.5% as financial stocks declined ahead of the broader stock indexes.

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Economic Data
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