Greek Fire Continues To Burn ETFs

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Markets and index ETFs continued losing yesterday as Greek fears of default or exit from the euro continued to plague world markets. Greek Syriza party leader Alexis Tsipras will convene with new Prime Minister Antonis Samaras of the New Democracy party and Evangelos Venizelos of PASOK to resume attempts at formation of a coalition government. Widespread reports indicate that Tsipras will obtain an agreement with Samaras and Venizelos to inform the European Union that Greece plans to abandon the EU-imposed austerity program.

Although nothing is written in stone yet, we also anticipate that if Greece does indeed abandon the EU-imposed austerity program, Greece will likely face severe backlash in terms of no more bailout money (which is bad), a possible default (which is very, very bad), a possible exit from the Euro (which is very, very, very bad).
 
Needless to say, US markets actually dropped more than .3% (with the exception of the NASDAQ) in reaction to new Greek developments, as the SPDR S&P 500 ETF (NYSEARCA:SPY) lost .59%, the SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA) lost .57%, the PowerShares QQQ Trust Series 1 ETF (NASDAQ:QQQ) lost .31%, and the iShares Russell 2000 Index ETF (NYSEARCA:IWM) lost .57%. Our friend oil also lost again yesterday, as the United States Oil Fund LP ETF (NYSEARCA:USO) shaved off .95%.
 
The problems do not stop with Greece, however, as Spain’s bond yields rose above the “psychological” 6% barrier yesterday, likely due to Spain’s recent announcement that the government intends to bail out its third largest bank, Bankia (BKIA.E). Italian bond yields are not fairing much better either, as their yields rose to 5.57%.
 
All in all, a fiery day filled with bailouts, high bond yields, potential default, potential Greek exit from euro, potential euro implosion, and overall economic Armageddon if things really do get sticky. So what about the U.S.?
 
The Commerce Department announced yesterday with its Wholesale Inventories Report that wholesale inventories rose less than expected with a .3% increased. Although at least the figure rose, the report is a drop in the bucket compared to other news from abroad, however it serves its purpose as an indicator that our economy is still growing.
 
Bottom Line: Greece continues to fan the fires of the European disaster zone. Perhaps Europe and Greece are merely exacerbating a deeper, fundamental market correction after a strong first quarter, but I am willing to bet that as Europe continues to roil itself, Europe will continue to roil markets as well.

Disclaimer: Wall Street Sector Selector trades a wide variety of ETFs and positions can change at any time.