Losing Streak Continues for ETFs

Despite solidly positive economic news on manufacturing and home sales, stocks and exchange-traded funds were swept up in a broad selloff Tuesday.

The Dow Jones Industrial Average closed down 186 to 9311, a 2% one-day drop. The Nasdaq shed 40 to 1969, also a 2% slide, and the S&P 500 declined 23 to 998, a 2.3% loss. Some see this two-day losing streak as a sign that the summer rally, which was powered by better-than-expected earnings, had come to an end.

Financial-services stocks again led declining sectors as fears mounted that there were more bank failures on the way. Federal regulators currently list 416 banks as troubled.

But there was some good news. Traders were buoyed by the Institute for Supply Manufacturing's August manufacturing report, which showed an increase to 52.9, the first time it registered above 50 since January of 2008. The National Association of Realtors said pending home sales, transactions for which contracts have been signed, rose 3.2% in July, the biggest increase since June 2007. However, increases are likely to slow once the $8,000 federal tax credit extended to first-time home buyers expires in November.

The Commerce Department said July construction spending dropped 0.2% from June. For a detailed rundown on Tuesday’s trading session see our market story. 

The semiconductor-heavy iShares MSCI Taiwan Index fund (EWT) held gains of 1.1% as investors looked to the chip sector as a source of strength. Investors backing off equities headed for the traditional safe haven of gold, pushing the SPDR Gold Shares fund (GLD) up 0.5%.

The SPDR KBW Bank fund (KBE) took a 5.9% hit on worries about more bank failures. The Financial Select Sector SPDR fund (XLF) also declined 5.4%. The iShares Dow Jones U.S. Real Estate Index fund (IYF) sagged 5.1% as commercial real estate troubles factored into investor worries.

Earnings and Conference Calls
ABM Industries, Adept Technology, American Software, Brown-Forman, Casella Waste Systems, Collective Brands, Hovnanian Enterprises, Joy Global, Martek Biosciences, Synovis Life Technologies, Zale

Economic Data
7:00 a.m. MBA Purchase Applications
7:30 a.m. Challenger Job Cut Report
8:15 a.m. ADP Employment Report
8:30 a.m. Productivity and Costs
10:00 a.m. Factory Orders
10:30 a.m. EIA Petroleum Status Report
2:00 p.m. FOMC Minutes