U.S. markets took their cues from Europe in today’s trading, sending major benchmarks sharply lower on the day. Britain, Germany, and France all saw their equity markets fall by more than 2.5%, which led to a sharply lower opening on Wall Street. The S&P 500 sank by close to 30 points while the Nasdaq slid by almost 3%. Additionally, oil tumbled lower on demand fears as the commodity lost more than 4% on the day. This sharp decline continued the rough, choppy market that many have been experiencing as of late as Europe agreed on a $144 billion bailout package for the highly indebted nation of Greece. Although many were glad that a bailout came, investors grew concerned that the bailout would make it more difficult to help Spain and Portugal should they need assistance in the near future (see Six ETFs To Play Turmoil In Greece).
The ETFdb 60 Index, a benchmark measuring the performance of asset classes available through exchange-traded products, slid 19.31 points, or 1.8%, registering one of its biggest single-session declines of the year.
One of the biggest gainers on the day was iPath S&P 500 VIX Short-Term Futures ETN (VXX), which soared higher by more than 10% on continued fear in Europe. “When the stock market does this in conjunction with a flight to safety in bonds and a flight to safety in the dollar and the yen, then you should expect a jump in the volatility index,” said Andrew Wilkinson, senior strategist at Interactive Brokers. “So we’ve got a nasty mix of so many different variables today, each from a different part of the globe, that’s making for difficult navigation in stormy waters.” Although VXX has been absolutely crushed over the past 52 weeks, posting an incredible loss of close to 74.5%, the fund has been on a hot streak as of late and has posted a gain of close to 20% over the past week (see more fundamentals of VXX here).
The biggest loser on the day for the ETFdb 60 was a little bit of a surprise given the turmoil in Europe; the iShares MSCI Brazil Index Fund (EWZ) tumbled by more than 5.3% in Tuesday trading. A sharp decline in the value of the euro sent investors scrambling to buy up dollars, which helped to sink commodity prices, a mainstay of the Brazilian economy. Sugar, one of the country’s most important crops, was down close to 3.1% in the day’s trading (see holdings of EWZ here).
Disclosure: Eric is long EWZ.