ETFs Sell Off Despite Global Rate Cuts

In an unprecedented move, the Federal Reserve, the Bank of England, the European Central Bank and several other institutions across the globe jointly cut interest rates in an effort to turn around one of the worst financial calamities the world has endured. Indeed, overnight Britain injected $87 billion into its ailing banking system after credit markets there essentially seized up. Here in the States the Federal Reserve cut the federal funds rate a half percentage point to 1.5% before its upcoming meeting.

Meanwhile, the third-quarter earnings season got underway Tuesday night when Alcoa (AA) announced a disappointing 52% decline in third-quarter net income. Low aluminum prices and dwindling margins were the culprits.

There was also some economic news for traders to contemplate. The National Association of Realtors announced pending home sales jumped 7.4% in August, a sign buyers took advantage of low home prices. The Department of Energy announced weekly crude inventories increased by 8.1 million barrels. Crude increased $1.44 per barrel to the $88 level. Retail sales for the month of September decreased greater than expected.

Treasury Secretary Henry Paulson tried to calm markets with a mid-day press conference. But the Dow Jones Industrial Average was still volatile the entire trading session. Indeed, during the last hour that benchmark sold off strongly, dropping 189 points to close at 9,258. It was the sixth straight day the broad market posted a loss.

Given the uncertainty surrounding the world's financial markets, investors went on the hunt for safe havens. Precious metals were a favorite. Gold jumped $29 an ounce to close at $911. That increase helped boost gold-focused ETFs. The Market Vectors Gold Miners ETF (GDX) climbed 14.9%.

Bloomberg reported economists in Chile were revising their estimates on whether the country's central bank would cut interest rates, given the coordinated effort that took place around the globe Wednesday. They now think rates will be held steady, which didn't sit well with holders of the iShares MSCI Chile ETF (ECH). It fell 8% in light trading.

Exit Strategy
Index Universe is reporting that FocusShares will close its four exchange traded funds. The funds will liquidate Oct. 20.

Look for some clarity on short selling financial stocks. The SEC ban ended Thursday.

Earnings & Conference Calls

Thursday
International Speedway, Robbins & Myers

Economic Data

Thursday
8:30a.m. Initial Jobless Claims
10:00a.m. Aug. Wholesale Trade
10:00a.m. DJ-BTMU Business Barometer

A look at how the industry's most popular ETFs did on Wednesday.