Yesterday’s strong markets were only temporary, as today aimed to erase Tuesday’s forward progress in a number of asset classes. Markets began the day relatively flat, only to crash upon hearing the Fed’s plans for “Operation Twist”, which seems to have done little to convince investors that the economy can turn around in the near future. Investors have plenty more on their plate though, as the Obama Administration discusses a hefty budget cut and tax restructure known as the “Buffet Rule”. Under the proposed tax structure high-income individuals will be taxed higher than middle and lower class citizens [see also Three ETFs For ‘Operation Twist’].
Today was something of a rarity; gold, equities, and oil all finished the day in the red, whereas gold usually tends to offset the losses in the other two. The day saw oil finish around $85.50 per barrel and gold fall below the $1,800/oz. mark, creating an interesting buying opportunity for gold bugs who feel that the metal has nowhere to go but up. With a number of stocks and securities posting major swings on the day, we outline the best and worst performing funds from our ETFdb 60 Index:
One of the biggest ETF winners on the day was the S&P 500 VIX Short-Term Futures ETN (VXX), which jumped 5.4% on market instability. The main culprit for today’s losses came from Ben Bernanke’s announcement about Operation Twist and the Fed’s plan moving forward. Operation twist will consist of the Fed selling $400 billion in its short term Treasury portfolio and using the proceeds to buy longer dated securities. According to the Fed, this asset-purchasing program should put downward pressure on long term interest rates, which will hopefully spark the lackluster economy. Either way, investors were not amused, and this volatility product skyrocketed during the final hours of trading [see also ETF Insider: Markets At Fed’s Mercy].
One of the biggest ETF losers on the day came from the MSCI Brazil Index Fund (EWZ). This product offers exposure to the Brazilian equity market and features top holdings like Petrobras and Banco Bradesco. Today, “the Brazilian real tumbled to the lowest level in 15 months as Greece’s struggle to avoid a debt default prompted investors to reduce holdings of higher-yielding emerging-market assets” wrote Ye Xie and Josue Leonel. In early morning trading, the real had already surrendered 2% to the U.S. dollar, putting major downward pressure on this mainstream emerging market. All in all, EWZ tumbled 4.4% on the day.
Disclosure: No positions at time of writing.