Inflation, Job Woes Weigh on ETFs

Exchange traded funds (ETFs) turned flat on Thursday after mixed economic data raised concerns about the labor market and higher inflation.

• The Labor Department report said the number of U.S. workers who filed new applications for jobless benefits surged by 35,000 last week to 445,000. The four-week average of new claims rose a much smaller 5,500 to 416,500. The moving average is considered a more accurate measure of employment trends because it evens out fluctuations in the weekly data that can give a distorted picture of the labor market. The number of people who continue to receive unemployment checks, meanwhile, dropped. As workers become more discerning about spending investors can consider the First Trust Consumer Staples AlphaDEX (FXG), which is up 0.6% so far today.

• U.S. wholesale prices climbed 1.1% in December, largely reflecting a spike in gasoline, the Labor Department reported. The seasonally adjusted increase in producer prices last month was the biggest since last January, according to government data. Wholesale prices have climbed 4% over the past 12 months, but the core rate has risen at a much slower pace — 1.3%. Low inflation is generally viewed positively, but sometimes it reflects weak economic conditions. United States Gasoline (UGA) is down today, but in the last three months it has gained nearly 20%.
• The U.S. trade deficit narrowed for a fourth straight month in November, confounding economists who had expected a rebound, government data showed Thursday. The nation’s trade deficit contracted a slight 0.3% to $38.3 billion from a revised $38.4 billion in October, the Commerce Department said. This marked the smallest trade gap since January. The last time the deficit shrank for four months in a row was during the global financial crisis — from late 2008 into early 2009. Both exports and imports rose in November, but exports expanded at a slightly faster pace. iShares Dow Jones U.S. Industrials (IYJ) is flat today in the wake of the news.
• Shares of Marathon Oil Corp. (MRO) surged more than 8% in early trading after the company said its board of directors has approved a plan to split the company in two. The Houston-based energy company said it would spin off its refinery business, which would become the fifth-largest U.S. producer of gasoline and other fuels, in order to focus on oil and gas exploration. PowerShares Dynamic Energy (PXE), which counts Marathon as 5.4% of its total holdings, is up a moderate 0.3% so far today.

Disclosure: No positions