Daily ETF Roundup: UNG Tumbles On EIA Report, VXX Continues Surge On Uncertainty

by on June 16, 2011 | ETFs Mentioned:

Another rocky session in equity markets left little decided on the future of Greece heading into Friday, suggesting that choppy trading is likely to continue to close out the week. Although equities started off on a high note, they slumped in the early afternoon period but finished the day markedly higher. This was especially true for the Dow which finished the day ahead by 0.5% and to a lesser extent for the S&P 500 which gained 0.2% on the day. However, the tech-heavy Nasdaq continued to experience weakness and slumped by 0.3% in Thursday trading. Commodity markets were also mixed on the day as a weaker dollar spelled good news for safe haven commodities such as gold and silver, but did little to boost soft commodities which sank again today. In Treasury markets, investors continued to pile into debt of all maturity levels although greater inflows were seen in the longer-term notes as many avoided the two year debt thanks to its sub 0.4% yield. With that being said, the market situation remains precarious and could shift in the next few days based on what happens in Europe. “What happens in Greece over the next several days is probably the biggest issue facing the market in the near term, there’s been a lot of talk but no final action taken to resolve the situation, and the longer this goes on the more uncertainty it creates,” said Michael Sheldon, chief market strategist at RDM Financial.

One of the biggest winners in the ETFdb 60 was the iPath S&P 500 Short-Term Futures ETN (VXX) which soared again today, this time by 5.4%. Today’s gains were largely thanks to more bearish data and continued uncertainty over the Greek debt situation. In terms of data, investors saw new claims for jobless benefits stay elevated above the psychologically important 400,000 mark while the Philly Fed’s business activity index pointed to a contraction in manufacturing, although the impact of this was muted as the focus remained on the situation in Europe. An aid package from the EU and the IMF to Greece looks increasingly uncertain as the bailout comes with stipulations for more budget cuts across the board. The Greek government appears unable or unwilling to do this, sparking more fears of default. These worries are already starting to spread to other markets such as Spain which saw mild interest from its recent bond sale, pushing yields on Spanish intermediate term debt to an 11-year high. These worries sparked continued interest in VXX, an ETN that represents the ‘fear index’. In light of the turmoil, VXX has surged, gaining close to 14.5% in the past week alone, a level that could rise even further if Greek questions remain to close out the week [see charts of VXX here].

One of the biggest losers on the day was the United States Natural Gas Fund (UNG) which sank by 3.4% in Thursday trading. These heavy losses were due to the weekly release of the EIA report on natural gas storage levels throughout the nation. The important release showed that in the week ending June 10th, supplies rose by 69 bcf, slightly higher than analyst expectations of 67 bcf. This bumped up the total U.S. storage to 2.256 tcf, 275 bcf lower than last year at this time and close to 76 bcf below the five year average. Thanks to this addition to supplies above estimates, traders sold of natural gas, leading futures-based products such as UNG sharply lower on the day. “It’s a seasonally low number, but we’ve had the heat and these last two reports priced into the market, and now that buying interest has gotten priced out,” said Stephen Schork, president of Schork Group Inc., a consulting company in Villanova, Pennsylvania. “The next couple of reports are probably going to be more bearish.” [see more on UNG's fact sheet]

Disclosure: No positions at time of writing.