Daily ETF Roundup: IYT Tumbles On Higher Crude, GDX Rises On Gold Demand

by on May 24, 2011 | ETFs Mentioned:

Although stocks rose modestly to start the day, they soon faltered, tumbling again in Tuesday trading. As a result, the Dow finished the day down 25 points while the S&P lost just 0.1% although weakness continued in the tech-heavy Nasdaq as the benchmark fell by 0.5% on the day thanks to rough days out of key components eBay, Amazon, and Intel. Commodities, finished much better in comparison, as gold rose by close to $10/oz. and WTI finished about fifty cents off of the $100/bbl. level. Silver, which has been beaten down so far in May, led all of the major commodities gaining more than $1.7/oz. or roughly 4.9% in the session, helping to propel the white metal above the $36.6 mark. While there was broad strength in the commodity markets in Tuesday trading, weakness was still had in the grain sector as corn, wheat, and soybeans all declined on the day. Bond and currency markets remained volatile as well during today’s session, as the U.S. dollar retreated against its major rivals as the euro rebounded slightly against the greenback. Nevertheless, the U.S. Treasury market saw inflows once again,  pushing yields on the two year down to 0.51% on the day. 

One of the biggest winners in the ETFdb 60 was the Market Vectors Gold Miners ETF (GDX) which gained 2.3% on the day.  These gains came as investors clamored for more safe havens in light of slumping equities and continued uncertainty over the future of the euro zone. Investors grew especially worried after a report from Moody’s suggested that if Greece were to default it would lead to an immediate multi notch downgrade of Portuguese and Irish debt, possibly to junk status. “There is so much uncertainty that the downside risk for gold is low in the short term,” said VTB Capital analyst Andrey Kryuchenkov.  “People are still frightened about Portugal and about a possible restructuring of the Greek debt so safe haven flows will continue.” As a result, investors scooped up gold mining funds such as GDX since they often represent a leveraged play on gold. This makes funds like GDX likely to outperform when gold prices are rising, allowing this popular fund from Van Eck to lead on the upside in the ETFdb 60 during Tuesday trading [see more on GDX's fact sheet].

One of the biggest losers in the ETF world was the iShares Dow Jones Transportation Average Fund (IYT) which sank by 0.7% in the session. Today’s losses were largely the result of crude’s return to near $100/bbl. levels and the impact that this move has on the transportation sector. Transports are one of, if not the most, impacted sectors by changes in fuel prices as higher prices tend to eat into margins across the sector and especially so in the companies that employ a lot of trucking and air freight services such as UPS or FedEx. Additional harmful news came to the transportation sector from Goldman Sachs which upped its price forecast for Brent crude. The investment bank raised its 12 month price target to $130/bbl for the European benchmark while also raising its 2012 forecast to $140/bbl. up from $120/bbl, citing the loss of Libyan production and an improving demand picture for the move. As a result, a variety of names in the transport sector sold off leading IYT to the bottom spot in terms of Tuesday performance in the ETFdb 60 [see holdings of IYT here].

Disclosure: No positions at time of writing.