Equity markets continued their slump to finish the week sharply lower; the Dow finished the day down by 1.5% while the Nasdaq and S&P 500 both slumped by close to 2%. This sharp decline came after investors continued selling in the wake of the trillion dollar bailout package for indebted nations in Europe. Many are beginning to wonder if the spending cuts imposed on the many government budgets will prevent weaker nations such as Spain and Portugal from growing their way out of debt burdens. Among the hardest hit equities were credit card giants Visa and Mastercard, which both saw their shares sink by close to 10% after the Senate passed a bill limiting debit card fees. Meanwhile, in commodity markets, gold finished the day up again while oil finished the day lower by 3.4%, settling at just under $72/bbl.
The ETFdb 60 Index concluded a rocky week by losing 12.07 points, or 1.2%, bringing the benchmark back to breakeven on the year. Losers outnumbered winners by almost four-to-one, as aggregate volume came in at 1.2 billion shares.
Among the biggest gainers on the ETFdb 60 was the iPath S&P 500 VIX Short-Term Futures ETN (VXX) which soared higher by 8.6%. This spike came after investors sold off equities and fled to the safety of U.S. Treasuries, despite relatively upbeat economic data (including a boost in retail sales and industrial production). The good data conflicted with investor fears regarding slower growth levels, which led to a spike in volatility. Ironically, the volatility ETN has been extremely volatile as of late; although the fund is down 67.2% over the past 52 weeks it is up 40.9% over the past month (see more fundamentals of VXX).
One of the biggest losers on the day was the Vanguard European ETF (VGK), which sank by 3.3% in Friday trading. The slump came as investors grew increasingly worried that harsh austerity measures would kill growth in the euro zone’s weakest members. Additionally, the euro has shown weakness in much of this week’s trading; earlier today the currency hit a 18 month low against the dollar, tumbling below $1.24. “We’re on the cusp of a crisis of confidence,” said Derek Halpenny, currency economist at Bank of Tokyo-Mitsubishi UFJ in London to the New York Times. “We’ve had rumors of countries threatening to depart from the euro and comments from officials that sound like people at the heart of Europe are concerned about a possible collapse.”
Disclosure: No positions at time of writing.