Equity markets tumbled to close out the holiday-shortened week, as fears over a lack of private sector job creation and a possible continuation of the sovereign debt crisis in Hungary spooked investors. The major indexes were all down more than 3%, with the Nasdaq slumping by 3.6% on the day. In commodity markets, oil tumbled more than 4.6%, while gold managed to finish the day slightly higher to close out at $1,217/oz. as investors continued to flock to safe havens (see Five Safe Haven ETFs). The sharp losses on Wall Street came as the May jobs report was unveiled, showing that government hires (which were mostly for the census) outpaced private sector hires by a pace of 10 to 1. Additionally, long-term unemployment is beginning to become a serious problem; the number of people out of work six months or longer reached a record high in May of 6.76 million, which helped to send stocks lower from start to finish to close out the week.
The ETFdb 60 Index, a benchmark measuring the performance of asset classes available through ETFs, slid 21.12 points, or 2.1%, to close at 994.69. Only 14 index components were in positive territory on the day, most of them fixed income products.
The biggest winner in the ETFdb 60 was the iPath S&P 500 VIX Short-Term Futures ETN (VXX) which soared higher by 10.2%. This sharp increase in volatility came as fear returned over the markets as the health of the European financial system was once again called into question. This came after a government spokesperson in Hungary said that his country could very well default and that their economy was in a ‘grave situation.’ Over the past three months, VXX has posted a 25.1% gain and is now within shouting distance of positive territory for 2010; the fund is down 8.2% on the year (see more VXX fundamentals here).
One of the biggest losers was the Vanguard REIT ETF (VNQ), which fell by 5.7% to close out the week. This sharp loss can largely be attributed to the weakness in the jobs report which calls into question the demand for office and retail space in the near future. The fund’s two top holdings, Simon Property Group and Vornado Realty Trust were both down more than 5.5% on the day, which helped to push VNQ to a 7.3% loss on the week (see more charts of VNQ here). Despite this sharp drop, VNQ is still up 3.9% thus far in 2010 and American real estate is still outperforming its international counterparts.
Disclosure: No positions at time of writing.