U.S. equity markets started the week in the green as solid news from blue chips Caterpillar, Microsoft, and Wal-Mart helped to carry indexes higher in Monday trading. The Dow finished the day ahead by 0.6% while the broader indexes trailed the DJIA, gaining 0.5% each in comparison. Meanwhile, commodity markets rebounded again in Monday trading as the dollar weakened against many of its major rivals pushing gold higher by about $1/oz. and oil ahead by about 23 cents on the day. Soft commodities were more mixed on the session as sugar recorded a 3.3% surge while coffee tumbled by 2.5% on the day. Despite concern over the Greek situation, many investors chose to wait it out until more information was available on how the bailout would proceed or if Greece would reject another round of austerity measures. As a result, T-bills finished the session flat and the greenback was rangebound against many of the world’s other major currencies.
One of the biggest ETF winners on the day was the Health Care Select Sector SPDR (XLV) which rose by 1.0% on the day. Today’s gains were largely thanks to outperformance from the insurance sector, as many of these companies rose by more than 2% on the day. In fact, UnitedHealth (+2.6%), Aetna (+3.6%), Humana (+3.6%), and WellPoint (+3.2%) all helped to carry XLV on a day in which big pharma trended upwards but didn’t produce anything spectacular in terms of performance. This jump helps to reverse a recent downtrend in the broad health care sector, as XLV is down close to 3.4% over the past month. Nevertheless, the fund is still up close to 11.5% so far in 2011 and has been significantly outperforming the S&P 500 over the same time period [see holdings of XLV here].
One of the biggest losers in the ETFdb 60 was the iPath S&P 500 VIX Short-Term Futures ETN (VXX) which declined by 4.4% to start the week. Today’s sharp losses were likely due to the Greek situation which although uncertain could be moving towards another bailout that would keep the country afloat. “In the end, investors realize the European Union isn’t going to let Greece fall off the map, just like our legislators are playing hard ball with the debt ceiling,” said Peter Cardillo, chief market economist at Avalon Partners. It also didn’t hurt that many of the nation’s biggest companies, including retail giant Wal-Mart, finished the day in the green, further limiting demand for the ETN representation of the ‘fear index’. The gains were especially large for CAT which saw its stock jump by 2.3% thanks to a 52% surge in sales for the last three months when compared to last year. Thanks to this, investors engaged in bargain hunting across the board in the U.S. market and shunned sectors like volatility which thrive on uncertain conditions and fear [see more on the VXX fact sheet].
Disclosure: No positions at time of writing.