Equity markets around the globe plunged lower as ongoing Euro zone debt woes continue to weigh down on investor’s confidence, while resurfacing deficit drama in the U.S. only added to the growing cloud of uncertainty. The Dow Jones Industrial Average led the way lower, plunging 2.11% on the day, while the S&P 500 was the most resilient of the domestic equity indexes, shedding 1.87%. Profit taking was abundant across every corner of the market and even gold failed to take on safe haven appeal. Futures prices for the precious yellow metal broke below the $1,700 level, settling near $1,680 an ounce as the trading session drew to a close.
Investor sentiment on Wall Street declined considerably after the supercommittee reportedly failed to reach an agreement, prolonging negotiations (and anxiety) into Tuesday and Wednesday. Mohamed A. El-Erian, CEO of Pacific Investment Management Co., said “The global selloff in risk assets reflects concerns about the inability of policy makers to catch up with unsettling economic and financial realities, particularly in Europe and America”. Deficit drama is now at the forefront of American and European markets alike, as investors anxiously await for lawmakers to bring worth comprehensive solutions to ensure financial stability [see Tax Loss Harvesting With ETFs: 6 Ideas To Lower Client Liabilities] .
The iShares MSCI South Korea Index Fund (EWY) was one of the worst performers, slipping 3.23% on the day. Ongoing debt woes stemming from the Euro zone coupled with resurfacing U.S. deficit drama, paved the way for profit-taking across Asian equity markets, with South Korea leading the way lower [see New High Tech ETFdb Portfolio]. If EWY breaks below $50 a share in the coming days, this ETF may soon retest the October 4th lows near $45 a share. EWY remains in red territory for 2011, turning in a 16% loss year-to-date.
The S&P 500 VIX Short-Term Futures ETN (VXX) was one of the few ETPs in green territory for the day, clinching a 1.39% gain on the day. Volatility spiked as selling pressures hit virtually every corner of the global market, bringing down commodities, real estate, and even gold. Investors can anticipate for volatile, range-bound trading to continue, so long as the debt drama at home and overseas remains unresolved [see ETF Insider: Will The Supercommittee Surprise?].
Disclosure: No positions at time of writing.