Daily ETF Roundup: VXX Tumbles, VNQ Surges

by on July 7, 2010 | ETFs Mentioned:

Equity markets surged higher in Wednesday trading as optimism regarding financials, materials, and European companies sent markets soaring. The Dow was up by almost 3%, while the Nasdaq and the S&P 500 both gained even more. Commodities also finished in positive territory, with gold falling just short of $1,200/oz. and oil surging ahead by close to 4%. This sharp gain was jump-started by a robust projection of second-quarter profits from State Street, which jumped by 10% on the day. That boosted other financials such as American Express, JP Morgan and Bank of America, which all rose by more than 4% on the day. “The market was really oversold,” said Paul Zemsky, head of asset allocation at ING Investment Management. “There’s all kinds of concerns about exposure to the European countries, and all that uncertainty that gets factored in probably overshoots and now you have State Street showing some good numbers and the yield curve is a money machine for banks.”

The ETFdb 60 Index surged ahead on Wednesday, adding 17.29 points, or 1.8%. Winners outnumbered losers by four-to-one, with every equity component of the benchmark finishing higher on the day.

One of the biggest gainers on the day was the Vanguard REIT ETF (VNQ), which jumped higher by 4.9% on the day. This sharp uptick came as fears temporarily subsided over the health of the financial sector of the economy, which helped to boost American real estate investment trusts. All of VNQ’s top five holdings were up at least 4.8% on the day, with the number four holding, Equity Residential, posting a gain of 5.3%. VNQ is up 4.1% so far this year and it pays a robust dividend of about 4% [see more holdings of VNQ here].

One of the biggest losers on the day was iPath S&P 500 VIX Short-Term Futures ETN (VXX), which sunk by 6.3% in Wednesday trading. VXX tends to perform very poorly in advancing markets and with the S&P 500 gaining more than 30 points on the day, the “fear index” plummeted on the day. Ironically, the volatility ETN has been very volatile as of late; the fund has posted a loss of 21% year to date but a gain of more than 35% over the past three months, even after today’s large drop [see more charts of VXX here].

Disclosure: No positions at time of writing.