Daily ETF Roundup: VWO Tanks, VXX Soars

by on January 28, 2011 | ETFs Mentioned:

Friday closed the week out on a low note, as markets fell from their 29 month highs. The Dow Jones Industrial Average lost over 150 points (1.4%) on the day, with the Nasdaq and the S&P taking a harder hit, losing 2.5%, and 1.8%, respectively. Markets were pushed into the red as tensions in Egypt continue to mount on what many have dubbed the “Friday of Wrath”. But the problems did not end there, Ford reported disappointing earnings, casting a shadow of doubt over the upcoming report from General Motors and creating further gloom in the consumer sector. Though the majority of the market saw a rough day, oil rebounded, shooting up nearly $3.75/barrel, regaining much of the ground that it had lost over the past week. Gold also had a slight rebound today gaining over 1% despite worries that the shiny commodity would lose its hold on the $1,300/ounce mark as investors scooped up precious metals as a safe haven play [see also Egyptian ETF Crumbles As Tunisian Protests Spread].

One of the biggest losers on the day was the Vanguard Emerging Markets ETF (VWO). The fund was down over 3% likely due to the issues surrounding Egypt. With violent protests getting worse by the day, many investors have made for the hills and pulled out of this fund, with its daily volume nearly double its average. Egypt stole headlines today, with pictures and even live feeds of the violent demonstrations unsettling emerging market investors, as citizens rebel due to unsatisfactory conditions within the nation. It was reported that the citizens had overtaken the government, as CNN’s Ben Wedeman reported that “there is no government, there is no authority, there’s nobody to protest against. State authority in much of downtown Cairo has disappeared.” Though VWO does not have direct ties to Egypt, many emerging markets saw rough trading days as investors quickly lost confidence in a variety of shaky markets due to the ongoing protests [see holdings of VWO here].

On the other end of the spectrum, one ETF saw astounding gains on the day. The iPath S&P 500 VIX Short-Term Futures ETN (VXX) jumped up 8.3% as markets went into a free-fall. This ETF was able to make profits off of a perfect storm of events that hit the markets in Friday trading. To start things off, Amazon missed their marks in reporting late yesterday, which was then followed by Ford missing their estimates before the bell today. This news helped to sink the consumer sector and was only compounded by the turn of events in Egypt where borderline anarchy in Cairo has pushed markets down in a volatile tailspin. This allowed VXX to take advantage and provide a hedge for investors in this sharp down day, helping to moderate losses for those who took advantage of its tendency to rise when broad markets are falling. This fund also posted volume that exceeded four times its daily average, showing the popularity this spiking fund saw on the day [see fundamentals of VXX here].

Disclosure: No positions at time of writing.