Daily ETF Roundup: GDX Continues Slide, VXX Rises On Uncertainty

by on May 3, 2011 | ETFs Mentioned:

U.S. equity markets had a very rocky session Tuesday, as gains that had materialized by noon fell by the wayside in afternoon trading, leading to losses for most of the major benchmarks. Both the S&P 500 and the Nasdaq finished the day in the red, declining by 0.3% and 0.8%, respectively, while the Dow made a nice final hour rally to finish the day flat. Commodity markets were even weaker on the day as gold continued to slide, today losing 1.2% while oil fell by 2.1% in comparison. Once again, trading was especially brutal for silver, as the white metal declined by close to 10%, or more than $4/oz. These losses represent one of the biggest tumbles for the metal in more than two years and came thanks to some very modest strength in the U.S. dollar and continued worries over a near-term top in the silver market as well as the changes to the margin requirements at the CME.

One of the biggest winners in the ETFdb 60 was the iPath S&P 500 VIX Short-Term Futures ETN (VXX), which gained 2.1% on the day. Today’s gains came on high volume as traders clamored for exposure to the ‘fear index’ as represented by this ETN. Volume exceeded 21.1 million shares for the day, well above the 16.6 million in average volume that the fund usually experiences as a host of lukewarm or downright poor earnings reports, as well as continued weakness in the commodity space, conspired to sink investor confidence in the markets. Among the biggest disappointments from an earnings perspective was pharma giant Pfizer. Although the company matched earnings expectations, it failed to meet Street predictions on revenues, causing the stock to tank and leading to continued fears over big pharma’s drug pipeline. This news also pulled down a number of other large components in the space and this report, along with severe weakness in the oil and gas space, led many investors straight into VXX, helping this ETN to produce a stellar performance during today’s market turmoil [see fundamentals of VXX here].

One of the biggest losers in the ETF world during Tuesday trading was the Market Vectors Gold Miners ETF (GDX), which was off by close to 3.2%. Thanks to the continued drop in the precious metals market, miners of these products have been reeling; GDX is now down close to 5% over the past week alone. Although speculation over a bursting bubble in these markets did play a significant role in this reversal of sentiment, a surprise rate hike in India also helped to cap demand for precious metals as well. India, one of the world’s largest consumers of precious metals, could see a bit of a slowdown thanks to this 50 basis point hike in rates, putting the overnight lending rate at 7.25%. Unfortunately for India, this is still roughly 1.5% below the rate of inflation so further rate hikes may be necessary to get price increases under control, a move that could further limit demand for gold in the near future and could be causing some of today’s selloff in the market [see more on GDX's fact sheet].

Disclosure: No positions at time of writing.