Daily ETF Roundup: VGK Rises On Rate Cut And Greek Flip Flow, VXX Sinks On Euro Euphoria

by on November 3, 2011 | ETFs Mentioned:

Stocks finished the day in bright green territory as Euro zone euphoria paved the way higher for equities all around the globe. One the home front, the NASDAQ led the way higher with a 2.2% gain on the day, while the S&P 500 Index climbed 1.88%. Gold and oil both went along for the ride while the U.S. dollar tumbled in the currency markets. Futures prices for the precious yellow metal closed near $1,765 an ounce while crude oil prices settled around $94 a barrel as the trading session drew to a close. Investors will be paying close attention to tomorrow U.S. unemployment report as the bulls look to extend gains into the weekend.

Greek default fears evaporated after Prime Minister George Papandreou said the nation won’t hold a referendum to the proposed three-pronged rescue plan. Just as news of the referendum sent stocks plunging yesterday, today’s news that Greece would presumably remain in the currency bloc propelled equities higher [see our new Euro Free Europe Portfolio]. “Papandreou absolutely blinked in this game of chicken,” said Michael Holland, chairman and founder of New York-based Holland & Co. Economic data on the home front continues to improve investors’ confidence in the markets as about three quarters of the S&P 500 companies that have reported earnings results since October 11th have beat analysts’ projections, according to data compiled by Bloomberg.

The Vanguard European ETF (VGK) was one of the biggest winners on the day as Euro zone debt woes simmered down, gaining 3.3% on the day. European equities surged after the European Central Bank unanimously lowered the interest rate from 1.5% down to 1.25%. The rise in stocks may have been a bit overdone seeing as how the rate cut was really a pre-emptive measure by the ECB to ensure that the debt stricken currency bloc does not slip into a recession [see 25 Things Every Financial Advisor Should Know About ETFs].

The S&P 500 VIX Short-Term Futures ETN (VXX) plunged lower as the cloud of uncertainty looming over the Euro zone cleared up a bit, shedding 4.9% on the day. Investor sentiment improved considerably as Greece decided to “play it safe” and hold off on a referendum, rather than risk loosing their spot in the currency bloc. This piece of good news, coupled with an ECB rate cut, sparked a buying wave in equity markets overseas with the excitement spilling over onto Wall Street, and likewise putting downward pressure on VXX [see October ETF Data: Surge In Inflows, Back Above $1 Trillion].

Disclosure: No positions at time of writing.