Daily ETF Roundup: VXX Soars, DBA Sinks

by on September 29, 2010 | ETFs Mentioned:

Equity markets finished a volatile Wednesday session in the red, as continued weakness in the financial sector helped to drag down stocks in the final hour of trading. The broad S&P 500 led the decliners, posting a loss of 0.3% but was trailed closely by a 0.2% loss by the Dow and a 0.1% dip for the Nasdaq. Gold managed to hang on to its record highs to finish the day around the $1,310/oz. mark, while oil rebounded more than 2.1% in today’s trading to finish close to $78/bbl.

Today’s losses were a result of weakness out of the banking industry as well as broad declines in the service sector and chemical manufacturing firms. Independent oil and gas firms and some of the smaller tech names gave the market a boost, but it wasn’t enough to finish the quarter’s penultimate day in positive territory. Protests across much of western Europe over austerity measures weighed on European markets, leaving investors to wonder if governments would be able to successfully implement tightening plans to reign in massive budget deficits in a number of euro zone member countries. “We are very worried, many things still need to the done,” said Ashok Shah, chief investment officer at London Capital, a fund management firm. “These countries still need to cut their budget deficits and convince the market that their five-year budget deficit plans will work out.”

The ETFdb 60 Index, a benchmark measuring the performance of asset classes available through ETFs, inched lower by 0.17 points.

One of the biggest winners on the day was the iPath S&P 500 VIX Short-Term Futures ETN (VXX), which surged by 2%. This gain came after the S&P 500 experienced a volatile trading session that saw prices dip to start the day, surge in mid-day trading and then fall back sharply to end the day. The fund experienced above average volume of 24 million shares, or roughly a 14% increase over its normal activity level. Despite this gain, VXX has posted a terrible September, losing more than 20% over the past four weeks as investor fears have moderated over the short-term [see charts of VXX here].

One of the biggest losers in the ETFdb 60 was the PowerShares DB Agriculture ETF (DBA), which sank by 1% on the day. This was largely due to weakness in the softs sector, as cotton, sugar, and coffee prices declined by 3.8%, 1.4%, and 1.7% respectively. Meanwhile, livestock also sank as lean hog prices fell by more than 2.3% on the day, suggesting broad weakness in the agricultural commodity market. These four commodities make up well over one-third of the fund’s total assets so these losses helped to drag down the fund in spite of continued strength in the corn and wheat markets [see fundamentals of DBA here].

Disclosure: No positions at time of writing.