Debt fears continued to hang over Wall Street to start the week as equities fell across the board thanks to a continued stalemate in the talks in Washington D.C. The Dow led the major indexes lower, falling by 70 basis points, while the Nasdaq and the S&P 500 both lost about 0.6% on the day. Losses were pretty widespread throughout the day as health care and financials led the losers while utilities, tech, and basic materials led the way on the upside. In commodity markets, gold continued to surge as its appeal as a safe haven allowed the metal to shine brightly to start the week; the yellow metal finished Monday trading at the $1,615/oz. mark, up nearly 0.8%. Other commodities were more mixed, as most softs fell by more than 1.5% including a 2.3% loss for cocoa and a 1.9% slump in sugar futures. Energy commodities also trended lower, although, losses weren’t too bad in this crucial sector of the market. Despite more concerns over a debt ceiling, the U.S. dollar only traded marginally lower, falling by 0.16% in terms of the U.S. dollar index, however, yields did rise across the board in terms of U.S. Treasury debt with the 10 Year Note finally breaching the 3.00% mark.
One of the biggest winners in the ETFdb 60 was the iPath S&P 500 VIX Short-Term Futures ETN (VXX) which surged by 3.8% to start the week. Today’s gains, which came on below average volume, were largely the result of a lack of progress over the U.S. debt ceiling and the enormous gulf that remains between the two political parties ahead of the August second deadline. Furthermore, many analysts are also growing concerned that even if the U.S. raises the ceiling that its credit rating will get downgraded from the AAA level. “Forget Greece, the euro zone, the Treasury sale, the economic numbers and corporate earnings, the story to watch is our government ‘at work’ trying to come to an agreement on debt reduction and spending cuts,” said Kevin Giddis, managing director at Morgan Keegan. Thanks to this continued uncertainty, investors piled into this ETN representation of the ‘fear index’ helping to push the fund up by 1.9% over the last two weeks, with further gains possible if the stalemate continues in Washington [see more on VXX's fact sheet].
One of the biggest losers on the day was the PowerShares WilderHill Clean Energy Portfolio (PBW) which slumped by 1.4% to open up the week. This was the result of concerns over subsides in a variety of developed nations stemming from the debt crises as well as a recent report that suggests that the industry may be heavily oversupplied this year. This could result in a sharp reduction of profits and further competition in terms of price, a notion that helped to heavily pull down many companies in Monday trading. In fact, Trina Solar and JA Solar, two companies that are top ten components of PBW, finished the day lower by 4.8% and 3.8%, respectively. Additionally, SunPower received a sell rating from Auriga, news that helped to push shares of the company down by close to 6.5% today. This weakness in solar spelled doom for this fund during today’s trading session, helping to push PBW down 14.2% over the past quarter alone [see holdings of PBW here].
Disclosure: Eric is long PBW