US GDP exceeded expectations at 1%
The U.S. Bureau of Economic Analysis published the fourth quarter GDP numbers on February 26, 2016. The GDP increased at an annual rate of 1.0% against a forecast of 0.4%. The GDP is one of the key indicators that the Federal Reserve looks at while deciding the monetary policy. The next monetary policy meeting is scheduled for March 15–16, 2016. Strong GDP data could increase the nearly faded odds of a rate hike at that time.
The increase in GDP was primarily attributed to personal consumption expenditures, residential fixed investment, and federal government spending, which was partially offset by the decrease in exports, nonresidential fixed investment, and state and local government spending. The data also suggested an increase in personal spending at 0.5%, which was the highest rate increase in nearly three quarters.
University of Michigan Consumer Confidence Index
The University of Michigan published its Consumer Confidence Index for February 2016, which came in at 91.7—above the forecast of 91. This increase was crucial because January had seen a sharp decline in consumer confidence.
The report suggested that the modest gains in wages and low inflation points to consumers expecting a growth in real income in the year ahead.
Impact on ETFs across sector SPDRs
The banking sector took positive cues from the GDP report with major gains in banking stocks. Looking at sector-specific SPDRs, the SPDR S&P Regional Banking ETF (KRE) was the outperformer among major sector-specific ETFs. KRE rose by 2.3% on February 26, 2016, at 2:00 PM EST.
The SPDR S&P Biotech ETF (XBI) and the SPDR S&P Bank ETF (KBE) were also trading higher by 2.3% and 2.2%, respectively. Among the major sector-specific SPDRs trading on a negative note, the Utilities Select Sector SPDR ETF (XLU) dipped by 2.6%. The Consumer Staples Select Sector SPDR ETF (XLP) and the SPDR Gold Shares ETF (GLD) fell by 1.5% and 0.91%, respectively.