Daily ETF Roundup: UNG Surges, VXX Sinks

by on June 2, 2010 | ETFs Mentioned:

Equity markets surged across the board on Wednesday, as the Dow jumped higher by 225 points and the Nasdaq and S&P 500 both gained roughly 2.6% in a solid mid-week session. This sharp surge higher was largely due to a turnaround in the energy sector, which saw many of its largest components recoup much of the ground they had lost in the previous trading session. Additionally, a solid report on the housing front helped to ease many investors’ concerns regarding the hard-hit sector; the National Association of Realtors said its index of contracts on existing homes rose 6 percent in April, ahead of the estimates of economists polled by Reuters. “Anything that indicates more of a stabilization — and not rapid declines — in housing is probably a good thing,” said Jason D. Pride, director of investment strategy at Glenmede in Philadelphia.

The ETFdb 60 Index, a benchmark measuring the performance of asset classes available through ETFs, climbed 15.14 points, or 1.5%, as winners outnumbered losers by three-to-one on the day.

One of the biggest losers in the ETFdb 60 was the iPath S&P 500 VIX Short-Term Futures ETN (VXX), which sank by 4.4% in today’s trading. This sharp decline came after a relatively smooth day in the markets, which saw stocks rise from the beginning of the day right up until the end–a nice change of pace from the recent string of late session sell-offs. While this change was good news for equity investors, it had a terrible effect on VXX, which despite its recent run-up is still down 15% on the year (see more charts of VXX here).

One of the biggest winners on the day was the United States Natural Gas Fund (UNG), which jumped higher by 4.9% in Wednesday trading. This hike in prices came after traders bought the fuel as a play on higher temperatures, which are expected for much of the Eastern portion of the country, as well as expectations of a busy hurricane season.  Forecasters are now predicting that the 2010 Atlantic hurricane season will be extremely active, featuring five intense hurricanes, twice the 50-year average. Should these storms disrupt gas infrastructure in the Gulf of Mexico, it could cause prices for the fuel to spike higher, which led to heavy buying of the fuel today (see more fundamentals of UNG here). Natural gas prices have soared in recent weeks as a barrage of positive economic indicators have shown the the recovery in the U.S. economy has continued to gain traction (see UNG’s Stellar May: Proof Of A U.S. Recovery)

Disclosure: No positions at time of writing.