Daily ETF Roundup: JJC Tumbles, VXX Rises

by on October 27, 2010 | ETFs Mentioned:

U.S. stock markets experienced a rocky trading session on Wednesday, as equities plunged to start the day but fought back after noon to pull back almost to breakeven. The Dow and S&P 500 sank by 0.4% and 0.3%, respectively, while the Nasdaq even managed to finish the day in positive territory after surging in the final two hours of trading to finish the day up by 0.2%. Commodities also sank on the day as gold plunged by 1% and oil finished the day just barely hanging on to the $82/bbl. mark. This commodity weakness was largely due to a stronger greenback; the dollar index rose by 0.5% on the day and helped to temper demand for some surging commodities such as copper (down 2.3%) and cotton (down 4.6%).

Markets experienced this choppiness based on a preliminary report suggesting that the Fed would buy roughly $250 billion under the second round of QE. This amount is far less than what many were hoping for given the massive bond buying campaign that the Fed engaged in during the heart of the financial crisis in late 2008. “The Fed was out there sending out a message,” said Jay Suskind, senior vice president at Duncan-Williams. “It was a cue for the market that maybe from a commodity and dollar destruction standpoint, those trends went too far.”

The ETFdb 60 Index dropped 5.8 points, or 0.5%, as losers outnumbered winners by more than five-to-one. Trading picked up over previous days, as investors became increasingly nervous ahead of key earnings reports and central bank meetings.

One of the biggest winners on the day was the iPath S&P 500 VIX Short-Term Futures ETN (VXX), which rose by 1.5%.  Today’s surge was a result of the rocky trading session which saw the S&P 500 start the day at the 1,186 mark, only to drop more than 14 points and then surge higher to finish the day down just 3.19 points. This choppy trading combined with disappointment over the Fed’s projected asset buying plans to increase demand for the ‘fear index’ and the main ETN tracking it, VXX. Despite this increase, VXX is still down 9.5% over the past week and has now lost 42.1% over the past quarter, one of the worst performers in the ETP world [also see VXX To Undergo Reverse Split].

One of the biggest losers in the ETFdb 60 was the iPath Dow Jones-UBS Copper ETN (JJC), which sank by 2.4% on the day. Wednesday’s losses caused the important base metal to retreat off of its 27 month high and were largely due to strength in the U.S. dollar, which managed to surge against most major world currencies. A stronger greenback was largely the result of the Fed’s asset buying predictions not coming anywhere close to many analyst and economist expectations, which helped to firm up the dollar in early morning trading. Despite today’s setback, JJC has still been a solid performer as of late; the fund has produced a 10% return for investors so far in 2010 and has gained 17.6% over the past quarter [see more fundamentals of JJC here].

Disclosure: No positions at time of writing.