After a whirlwind of a week, U.S. equities ended in positive territory today, rebounding after yesterday’s severe sell off, but fell short of cinching a gain on the week. Ironically, bank stocks led markets higher after Moody’s announced its long-anticipated downgrade of several global banks. Whether it be a “relief rally” or the case of “buying on bad news”, markets obviously took a breather from yesterday’s bombardment of bearish global economic data: the Dow Jones Industrial Average managed a 0.5% uptick, while the S&P 500 rose 0.7% and Nasdaq came out on top with its 1.2% gain [see also 101 ETF Lessons Every Financial Advisor Should Learn].
Moody’s announcement today was no surprise to investors, some even considered it a necessity in order for markets to be able to properly value the banks. Of the more than a dozen banks affected, five of the largest U.S. banks were downgraded by several notches, impacting their costs of borrowing and the way they will raise capital. As of today, the new Moody’s credit ratings for these banks are: Morgan Stanley (Baa1), J.P. Morgan (A2), Goldman Sachs (A3), Citigroup (Baa2), and Bank of America (Baa2) [see also Three ETF Charts That Sum Up 2012].
The Invesco PowerShares WilderHill Clean Energy Portfolio (PBW) was one of the best performers, gaining 2.08% on the day. While markets took their necessary breather, this ETF inched higher along with U.S. equities. PBW closed just shy of its high of $4.44 a share [see also Energy Bull ETFdb Portfolio].
The Barclays iPath S&P 500 VIX Short-Term Futures ETN (VXX) was one of the worst performers, shedding 10.23% on the day. The long awaited downgrades helped ease market tensions, cooling off yesterday’s surge in volatility. VXX gapped significantly lower at the open, only to plummet even further through out the day [see also Low Volatility Portfolio].
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Disclosure: No positions at time of writing.