US stocks closed sharply down Tuesday, extending losses for the fifth session as fear trade gathered steam over Eurozone’s financial health.
All the three major stock indices tumbled more than 1.5 percent after the spread between Spanish and German bond yields surged in European trade, bringing back memories of the Greek crisis just before the beginning of Q1 earnings season.
As markets panicked over a possible European contagion, Treasury yields on 10-year notes dropped below 2 percent on strong demand as safe-haven appeal of US debts increased.
The Dow Jones Industrial Average (DJIA) slumped 1.7 percent registering its biggest fall this year Tuesday. The S&P 500 Index (SPX) slipped 1.7 percent, knifing right through its 50-day moving average, and posting the largest single day point and percentage drop since December 8.
The NASDAQ Composite (COMP) lost 1.8 percent to close at 2,991.22; making it the biggest point and percentage drop in a single session this year and the first close below 3,000 since March 12.
As investors remained risk averse, Treasuries continued their forward march. Yields on 10-year Treasury bonds tumbled seven basis points to 1.98 percent, closing below the 2 percent mark for the first time since March 12.
ETFs in the news:
The iPath S&P 500 VIX Short Term Futures ETN (VXX) surged 8 percent as the so-called fear-tracking VIX index jumped 8.4 percent Tuesday. VIX has gained nearly 33 percent over the past five days, while VXX has managed to bounce off its all time low this year.
The Market Vectors Junior Gold Miners ETF (GDXJ) found some footing today, adding 3.11 percent on the day after four days of successive losses. The latest strength seen in the yellow metals sector is also supporting the fund’s upward movement.
The iShares Barclays 20+ Year Treasury Bond Fund (TLT) added an impressive 1.13 percent Tuesday, as equities continued to retreat for the fifth day. The fund has managed to reclaim its 50-day moving average following the latest four-day winning streak.
Among the day’s top losers, the iPath Dow Jones UBS Natural Gas Subindex Total Return ETN (GAZ) tops the chart for the second successive day. As natural gas funds continue to decline due to over-capacity, this premium-laden fund lost 6.05 percent for the day.
Europe focused funds have been battered for the last few days and the iShares MSCI Italy Index Fund (EWI) bore the brunt Tuesday, losing 3.8 percent for the day as sentiments remained negative on Europe.
Emerging markets are also facing the heat with the iShares MSCI Turkey Investable Market Index Fund (TUR) tumbling 3.52 percent. Other emerging market funds including the iShares MSCI Thailand Investable Market Index Fund (THD) and the iShares MSCI Mexico Investable Market Index Fund (EWW) also slid, losing more than 1 percent Tuesday.
Our Trend Tracking Indexes (TTIs) slipped as well with the international version showing far more weakness. That’s no surprise to me, since that’s where the majority of the current problems exist, which have the power to derail all world markets. There will be no decoupling of US markets once the heat is on.
Here’s how my TTI’s ended this day:
Domestic TTI: +3.87%
International TTI: +1.09%
This is the time to watch your sell stops and execute them when necessary. Be sure to tune into tomorrow’s Model ETF portfolio update for the latest figures.
Disclosure: Holdings in TLT, THD, TUR
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