Daily ETF Roundup: EWZ Sinks, VXX Soars

by on May 18, 2010 | ETFs Mentioned:

After initially starting off in positive territory following upbeat home construction data, equity markets slumped and finished the day down across the board. The S&P 500 finished down 1.4% while the tech heavy Nasdaq fell by close to 1.6%. Oil also had another rough day, sliding close to 1% and closing under $70/bbl. These declines were attributed to continued weakness in the euro, which hit a four year low against the greenback and traded close to $1.21 in the afternoon. Additionally, Germany announced that it is banning naked short selling on government debt certificates and shares of several financial companies according to the AP, news that sent shares tumbling across the region; the move is often seen as a desperate attempt to stabilize troubled markets.

The ETFdb 60 Index, a benchmark measuring the performance of asset classes available through ETFs, dropped 8.29 points, or 0.8%. Trading volume was once again heavy as traders remained extremely active.

Among the biggest winners in the ETFdb 60 was the iPath S&P 500 VIX Short-Term Futures ETN (VXX), which soared by 6% today. This jump came as markets see-sawed back and forth between gains and losses for much of the day. Additionally, continued weakness in the euro contributed to the market volatility, as some are beginning to question the viability of the currency as it currently stands. The euro hit a level not seen since 2006 and was trading down close to two cents, or 1.5%, in afternoon trading. This suggested to many traders that there is no end in sight for the troubled currency’s downturn, a fact that has been adding significant amounts of volatility to the market (see fundamentals of VXX).

One of the biggest losers in the index was iShares MSCI Brazil Index Fund (EWZ), which fell by 3.1% in today’s trading. This sharp decline came after severe weakness in EWZ’s top two holdings; Petroleo Brasileiro and Vale slumped on the day. Both of these companies are highly dependent on commodity prices and both felt the pain of lower oil as well as slightly lower copper and nickel. Petroleo Brasileiro finished the day down 1.5% while Vale shed close to 3.5% on the day. However, Vale was experiencing high levels of buying in after-hours trading and EWZ looks to rebound in Wednesday trading (see more on EWZ’s holdings).

Disclosure: Eric is long EWZ