Daily ETF Roundup: JJC Jumps, XLF Sinks

by on September 22, 2010 | ETFs Mentioned:

U.S. equity markets sank across the board in Wednesday trading with the tech heavy Nasdaq leading the way on the downside, sliding by 0.6%. These losses were followed by more moderate declines in the S&P 500 (down 0.5%) and the Dow (down 0.2%) as traders weighed the prospects of more quantitative easing and weak housing data. Precious metals continued their surge as gold almost broke the $1,300 oz. mark, finishing the day up roughly 1.4% as the dollar continued to weaken against the world’s major currencies, losing another cent against the euro and sinking by 0.7% against the yen.

Today’s modest losses came after a report surfaced showing that prices of American homes fell 0.5% in July to the lowest level in almost six years, according to the FHFA. “In the absence of a rapid employment growth, and factoring in all the potential excess housing supply from foreclosures and looming delinquencies, housing prices will likely remain under pressure and continue trending lower throughout this year and next,” said Yelena Schulyatyeva, an economist at BNP Paribas.

In addition to housing weakness, the banking and tech sectors both suffered as all of the major banks showed losses of more than 1.5% and Adobe helped to sink the technology sector after the company gave a weak forecast for the rest of the year. That prompted analysts to downgrade the company, pushing shares of the giant down by close to 20% on the day. “We seem to have misplaced our growth,” Credit Suisse analyst Philip Winslow said in a note. “We struggle to identify catalysts for at least the next 1-2 quarters.”

The ETFdb 60 Index, a benchmark measuring the performance of asset classes available through ETFs, dropped 1.1 points, 0r 1.1%. Winners and losers were evenly split on the day in relatively heavy trading.

One of the biggest winners on the day was the iPath DJ-UBS Copper ETN (JJC), which surged higher by 2.7%. These gains were a result of continued dollar weakness and robust demand out of the Asia Pacific region, which continues to demand more of the industrial metal. These two factors helped to push copper to a five month high in New York trading before the metal eventually settled at the $3.56/lb. mark. “In essence, (the Fed statement) is being perceived as an extended period of dollar weakness, or even possibly an additional devaluation of the dollar,” said Frank McGhee, head precious metals trader with Integrated Brokerage Services LLC in Chicago [see technicals of JJC here].

One of the biggest losers in the ETFdb 60 was the Financial Select Sector SPDR (XLF), which fell by 1.6% on the day. Today’s losses came after a host of downgrades from Deutsche Bank, which dramatically lowered its estimates for both Goldman Sachs and Morgan Stanley. All of the fund’s top ten holdings finished in the red for the day, including 4% losses for Morgan Stanley and MetLife. This steep declines were also a likely result of expectations of weakened revenues in some of the firms’ core businesses. “Trading volumes across the board were painfully slow during the months of June, July and August. The normal seasonal slowdown was exacerbated by continued concerns over the state of the global economy,” Jefferies’ Chairman and Chief Executive Richard Handler said in a statement [see more holdings of XLF here].

Disclosure: No positions at time of writing.