Equity ETFs Extend Losses On Global Growth Jitters; VXX Zooms, GDXJ Sinks

Ulli Market Review Contact

[Chart courtesy of MarketWatch.com]

Equity ETFs extended losses Wednesday after US durable goods orders came in weaker than expected, fueling global growth worries.

Commodities took a big hit with copper and oil roughly falling by 2 percent while gold lost more than a percent as investors dumped energy and materials related stocks.

Treasuries tumbled for the second day as demand for US debt hit the lowest mark in seven months with investors questioning if another round of quantitative easing may be on the table by the Federal Reserve.

The Dow Jones Industrial Average (DJIA) shed 0.5 percent but is still up 0.4 percent on a weekly basis. The S&P 500 Index (SPX) lost 0.5 percent with the energy and materials sectors in the 10-component index sliding the most. The tech-heavy NASDAQ Composite (COMP) tumbled 0.5 percent.

The yield on current five-year notes rose 0.02 percentage points to 1.04 percent as bid-to-cover ratio at the $35-billion auction dropped to 2.85, the lowest since August, from the 10-auction average of 2.91, which means demand at these yields was less than expected.  10-year benchmark yields moved up two basis points to 2.20 percent.

ETFs in news:

As equity ETFs slumped for the second day, the fear-tracking iPath S&P 500 VIX Short Term Futures ETN (VXX) found some strength today, surging 9.2 percent during the session but ended up only 0.76 percent over Tuesday. The fund is trading near all time lows currently, and it’ll be interesting to watch its movement in future.

The First Trust NYSE Arca Biotech Index Fund (FBT) added 2.54 percent on the day as Amylin Pharmaceuticals, the funds fourth largest holding, surged after news of the company rejecting a $3.5 billion bid from Bristol-Myers came in.

The Guggenheim Shipping ETF (SEA) rose 1.75 percent, its fourth consecutive day of gains as shipping stocks slowly gain traction. Investor discretion is advised nonetheless as transport counters can be volatile during a turmoil.

The iShares S&P California Muni Bond Fund (CMF) rose 0.25 percent as Wall Street euphoria took a break for the second day. The fund has added 2 percent on YTD basis.

Among the day’s top losers, Market Vectors Junior Gold Miners ETF (GDXJ) stood out with a 1.96 percent drop, as gold prices locked in another day of losses. Precious metal miners across the board have been hit by the slump.

Guggenheim Solar ETF (TAN) shed 3.23 percent today, hitting the lowest point in 2012. This top-heavy fund continues to get battered as the solar energy industry continues to struggle.

The iShares MSCI Brazil Index Fund (EWZ) dropped 2.17 percent as investors pulled out of risky asset classes amid weak US durable goods sales. EWZ however, has added an impressive 13 percent since January this year.

Our Trend Tracking Indexes (TTIs) pulled back slightly, but remain firmly on the bullish side of their respective trend lines.

Disclosure: Holdings in EWZ

Contact Ulli

Leave a Reply