The shortened holiday trading week proved to be quite unkind for many who had hoped that a fiscal cliff deal would be reached by now. Bearish pressures reigned supreme as gridlock in Washington D.C. encouraged profit taking ahead of the new year given the uncertain tax environment that 2013 holds in store. There is still lingering hope that policymakers will reach an agreement before the deadline, however, a “Hail Mary” resolution seems quite unlikely given the lack of negotiations seen thus far [Download 101 ETF Lessons Every Financial Advisor Should Learn].
Looming fiscal cliff drama took its toll on Wall Street, sinking major equity indexes into red territory ahead of the weekend. The Dow Jones ETF (DIA, A) led the way lower with a 1.17% loss on the day, while the Nasdaq ETF (QQQ, B+) proved most resilient shedding just under one percentage point.
On the international front, China’s market was the only one to end the week on a positive note; however, next week’s manufacturing data could once again spoil optimistic sentiment building overseas.
Bond ETF Roundup
“Risk Off” sentiment permeated the bond market as well; not surprisingly, U.S. Treasuries and investment grade corporate debt notes posted gains, while riskier high-yield notes slumped into red alongside stocks.
Commodity ETF Roundup
A slightly stronger U.S. dollar on the day created headwinds for futures prices across the board. Natural gas led the way higher on the day followed by corn futures, while precious and industrial metals lost ground.
ETF Chart Of The Day #1: VXX
The Barclays iPath S&P 500 VIX Short-Term Futures ETN (VXX, A-) was one of the best performers, gaining 5.10% on the day. Volatility levels spiked as another day passed without a clear solution in place, bringing us closer and closer to the dreaded fiscal cliff [see our Low Volatility ETFdb Portfolio].
ETF Chart Of The Day #2: XLE
The State Street Energy Select Sector SPDR (XLE, A) was one of the worst performers, shedding 1.74% on the day. XLE gapped lower at the opening bell only to trade sideways for most of the day; selling pressures returned in the final hours of trading and big volumes poured out of this ETF, perhaps pointing to further downside in the coming days [see also Energy Bull ETFdb Portfolio].
ETF Fun Fact Of The Day
The best performing regional strategy so far in 2012 has been our Ex-U.S. ETFdb Portfolio; this strategy is up an impressive 17.83% year-to-date.
Disclosure: No positions at time of writing.