Wall Street Today: Defensive ETF flows hint at ‘bullish but worried’ sentiment

Asian stocks look set to come under pressure Wednesday after U.S. equities suffered their worst drop in a month on concern that a resurgent public health crisis will hurt the economic recovery. The dollar held a rally.

Federal Reserve Chairman Jerome Powell said it remains to be seen how the U.S. economy will weather the recent infection surge, in comments that offered no views on the outlook for monetary policy.

“It’s not yet clear whether the Delta [coronavirus] strain will have important effects on the economy; we’ll have to see about that,” Mr. Powell told students and teachers Tuesday during a virtual event held by the central bank.

Cathie Wood laid out her case for why her firm has for months been paring holdings tied to Chinese technology giants. The superstar fund manager also rebutted investor Michael Burry after he bet against her flagship ETF.

“I think that China-U.S. saber rattling, which has intensified under this administration — a surprise to me — is bringing more activity back home,” Wood said in a Bloomberg Television interview taped on Aug. 13. “The supply-chain reorganization is going to be a positive for the U.S., and it’ll be somewhat of a negative for China.”

Spending at U.S. retailers fell sharply in July, amid cooling purchases of goods and signs of some pullback in consumer demand as U.S. case count tied to the Delta variant rose.

Retail sales—a measure of purchases at stores, at restaurants and online—fell 1.1% last month compared with June, the Commerce Department reported Tuesday. Excluding autos—a category where supply-chain issues have limited available inventory—sales declined 0.4%.

The move reflects a growing company stashing cash in an unconventional asset in response to economic uncertainty spurred by the public health crisis and governments’ response to it.

CNBC’s Jim Cramer said Tuesday that investors need to be on their toes as Wall Street trudges through a period of frequently reevaluating the Covid recovery.

Reaction to Home Depot’s earnings report before the market open Tuesday demonstrates the need to be nimble, the “Mad money" host said. “Don’t get too complacent in your negativity.”

Billions of dollars have flowed into “defensive” exchange traded funds in recent weeks, highlighting the jitters arising in some corners of Wall Street after US stocks have set a series of record peaks.

The resurgence in infections in some US states, evidence of rising inflationary pressures and concerns that the Federal Reserve will soon start to scale back its vast asset purchasing scheme have already prompted some investors to adopt a more cautious stance.

Chinese stocks listed in the U.S. were hit by another strong wave of selling pressure Tuesday.

The Nasdaq Golden Dragon China Index -- which tracks 98 of China’s biggest firms listed in the U.S. -- fell for a sixth straight day, dropping 2.4%. Tuesday’s slump was led lower by tech-giants including Alibaba Group Holding Ltd., JD.com Inc. and Pinduoduo Inc., all of which declined by at least 3%. The selloff adds to what has been a brutal six months for Chinese stocks in the U.S. with the Nasdaq Golden Dragon China Index plunging more than 50% since hitting a record high in February.