Equity markets finished the week modestly lower, despite relatively strong data in the consumer markets and decent GDP growth numbers from Europe. The Dow finished down just 0.2% while the S&P 500 although the Nasdaq posted much steeper losses, falling by 0.4% and 0.8% respectively. Oil continued its slide to finish the day at the $75.6/bbl. mark, declining by close to 7% on the week as investors grow increasingly fearful of a prolonged slowdown that will lead to sagging demand for the commodity. Today’s losses came after a lowered earnings forecast from J.C. Penney and weakness from Kohl’s on Thursday that sent the retail sector plunging. There was a glimmer of hope for the sector though, as retail sales rose 0.4% in July after posting two consecutive months of declines and consumer confidence numbers beat estimates.
The ETFdb 60 Index declined by 0.93 points, or 0.1%, on relatively light trading volume.
One of the biggest gainers on the day was the iPath S&P 500 VIX Short-Term Futures ETN (VXX), which surged higher by 2.7%. This gain was thanks in large part to a choppy market that saw the S&P 500 cross its opening price several times throughout the day. Despite today’s gains, VXX is still down more than 30% so far in 2010; the note has posted a 10.1% gain over the past week as a sinking market has increased demand for securities that maintain inverse correlations with equity markets [see more fundamentals of VXX here].
One of the biggest losers in the ETFdb 60 was the Barclays Capital International Treasury Bond Fund SPDR (BWX), which fell by 1.4% to close out the week. This came from weakness in the Italian government bond market, which makes up the second largest holding of BWX at about 12% of total assets. An auction of 15 year Italian government bonds only mustered a bid-to-cover ratio of 1.27, down sharply from 1.74 when the bonds were last offered in May. Similarly, five year notes saw their ratios fall to 1.26 down from 1.41 last month. These decreasing ratios suggest that there is declining levels of demand for Italian bonds, which could lead to surging interest rates and lower bond prices in the near future [see more information about BWX on the fund's fact sheet].
Disclosure: No positions at time of writing.