After four nerve-racking days saw equity markets lose huge chunks of their value last week, investors awaited Monday’s opening bell with a mixture of hope and anxiety. A nearly $1 trillion bailout package to secure Europe’s finances was enough to reverse the downward trend of recent days, as major equity indexes turned sharply higher and reclaimed big portions of the ground lost last week. Investors overlooked reports that Fannie Mae needs another $8.4 billion in government aid, and didn’t have much of a reaction to Obama’s nomination of the Solicitor General to the Supreme Court.
The ETFdb 60 Index, a benchmark measuring the performance of asset classes available through ETFs, added 31.12 points, or 3.1%, to close at $1,044.09. Trading volume was once again heavy as investors bought back the risky assets they had sold off over the last four sessions. Winners outnumbered losers by five-to-one on the day.
The biggest winner on Monday was the iShares MSCI Brazil Index Fund (EWZ), which added 8.3%. Despite the significant geographic separation from the crisis in Europe, Brazilian ETFs have become particularly volatile in recent sessions. Commodity-intensive equities have been punished in recent sessions as a strengthening dollar has pushed down prices of natural resources. That trend reversed on Monday, as the euro recovered a bit of the ground lost over the last week (see Three ETFs For Euro Dollar Parity).
Last week’s star ETN traded sharply lower on Monday, as the iPath S&P 500 VIX Short-Term-Futures ETN (VXX) lost 14.3%. The European Union’s proposed $955 billion bailout package, which includes a contribution from the IMF, smoothed investor nerves. Moreover, the European Central Bank announced that it will go into the secondary market to buy euro zone national bonds. The Fed reactivated swap lines, allowing foreign institutions access to loans. All of these developments sent the “fear index” sharply lower, although it remains well above levels touched just a week ago.
Disclosure: No positions at time of writing.