Daily ETF Roundup: GDX Slides On Gold’s Weakness, XLI Rises On Strong Earnings

by on April 26, 2011 | ETFs Mentioned:

Investors cheered solid earnings reports from a variety of sectors, helping to push all of the major indexes sharply higher on the day. The Dow led the way with a 115 point gain, or about 0.95% and was closely trailed by the S&P which added 0.9% on its total, meanwhile, the Nasdaq also has a solid session, gaining 0.8%. Commodity markets were not as lucky as gold and oil both declined modestly on the session while other precious metals, such as silver, declined by more than 4.5% on the day reversing much of their recent gains. Other soft commodities, namely cotton, and most of the grains, also suffered but by far the biggest loser was silver. “Given the pace and scale of gains in gold and silver in recent weeks, there is the threat of a deeper correction in the coming sessions,” James Moore, an analyst at TheBullionDesk.com in London, said in a report. As a result of this reversal in sentiment in the precious metal markets, many traders piled into T-Bills despite the solid market as a way to hedge some of their exposure. The two year note is now once again within striking distance of the 0.6% mark while the 10 year declined by five basis points to the 3.31% level.

One of the biggest gainers in the ETFdb 60 was the Industrial Select Sector SPDR (XLI) which gained 1.9% in Tuesday trading. Today’s gains largely stemmed from a solid earnings report from market bellwethers 3M (MMM) and UPS. These two giants combine to make up more than 10% of XLI’s assets and due to thier market moving capabilities, both probably helped boost sentiment across the industry as well. 3M in particular was crucial to the solid performance out of XLI today as the giant announced a 16% surge in profits and a greatly increased outlook for the rest of the year. This report helped to increase optimism for a number of other companies in the space and carried XLI to gains on the session [see more holdings of XLI].

One of the biggest losers on the day was the Market Vectors Gold Miners ETF (GDX) which sank by 1.7% in the session. Today’s losses came as traders’ interest in precious metals evaporated in light of solid earnings in a variety of sectors. This trend helped to push investors out of the precious metals sector and into other corners of the market such as financials and industrials. Prices of the yellow metal sank by $5 oz. on the day, putting a stop to the commodity’s eight day winning streak. “A period of correction and consolidation has been expected for some time and it may ensue as gold, and particularly silver, are overbought in the short term,” analysts at GoldCore said in a note to clients. Since the gold miners and thus GDX are viewed as a leveraged play on the price of gold, any movements in the price of the yellow metal are generally amplified by the fund, causing GDX to sink heaviliy in today’s session [see more charts of GDX].

Disclosure: No positions at time of writing.