Today closed out the shortened trading week on a devastating note, as investors all around the world participated in a massive sell-off. The Dow slipped over 300 points and the S&P 500 tanked 2.7%. What is more surprising, is the fact that gold finished the day relatively flat. Typically, when equities tank, gold see strong gains as it is one of the few safe spots for investors who flee their equity positions. Last night saw President Obama give a major speech about the unemployment issues in our nation, outlining a $447 billion plan to bolster the economy and hiring alike. Apparently, the speech did little to boost investor confidence, as the euro-zone spooked investors with bad news, likely prompting the massive losses on the day [see also August ETF Stats: Keeping The Winning Streak Alive (Just Barely)].
One of the major sticking points on the day was the fears over a Greek default. While this has been something of an issue for roughly 18 months, the time frame may have shrunk dramatically, as some analysts are calling for the country to default in just a matter of days or weeks. The euro also saw a rough performance on the day, helping to push the EUR/USD rate down below 1.4, a figure that has not been seen for some time now.
One of the biggest ETF winners on the day came from S&P 500 VIX Short-Term Futures ETN (VXX) which surged by 9.5%. With all of the market volatility, the fund has seen its daily volume increase by nearly 13 million in the last month, sealing its place as an effective trading and speculation tool. While VXX often profits from market dips, the biggest culprit in today’s gains likely came from a key resignation at the ECB. Board member and chief economist Jurgen Stark stepped down in a surprising move, as he was not a supporter of bond-buying programs. This move leaves the ECB with just one German member, leading many to speculate that the country is slowly but surely removing itself from the euro-zone, or that a German threat to leave the euro-zone will force Greece to be expelled from the bloc [see also Safe Haven No More: Swiss Franc ETF Collapses On Peg To Euro].
One of the biggest ETF losers was seen in the energy sector, specifically in alternative energy with the WilderHill Clean Energy Portfolio (PBW). PBW tracks an index which seeks to invest in green or renewable sources of energy and today saw two factors combine to sink this fund nearly 4%. Firstly, many expected Obama, a long time green-jobs advocate, to announce some sort of plans to boost clean energy and jobs for that sector, yet his speech said little on the matter. What’s worse, solar company Solyndra, a long time poster-child for federal support of clean energy firms, filed for bankruptcy and will lay off over 1,000 workers. Also, oil prices dipped by 2.3%, putting pressure on clean energy, which seeks to prey on high fuel costs to compete in the free market. Thanks to all of these factors, along with the extreme weakness in Europe, it was a very rough end to the week for this clean energy fund from PowerShares. Cheaper oil means a lower outlook for all green energy firms [see also ETF Insider: Caution, Bumpy Trading Ahead].
Disclosure: No positions at time of writing.