Daily ETF Roundup: VXX Preys On Choppy Trading, XLF Sinks on JPM Losses

by on May 11, 2012 | ETFs Mentioned:

Markets were on a wild ride today as a number of conflicting data points pushed and pulled major equities in either direction. Eventually, the bears took over and most major benchmarks ended the week down, capping off another losing week on the street. The Dow lost 34 points and the S&P 500 surrendered 0.34% in today’s trading while the Nasdaq squeaked out a 0.01% gain. Although consumer sentiment was better than expected for the day, news of JP Morgan’s astronomical trading losses were enough to spook investors [see also 3 ETFs For A Euro Zone Double-Dip].

On the commodity side of things crude oil continued to take a beating as it lost 1.5% in trading. This marks a near two-week wallop for the fossil fuel as it has failed to establish any positive momentum in recent sessions. Gold also saw big losses on the day, creating a very enticing buy for those who believe that QE3 is just around the corner. For now, we outline two of the day’s biggest ETF movers to keep our readers up to date with all of the happenings in the financial world [see also Three Reasons Why Gold Is Overvalued].

Today’s big winner came from S&P 500 VIX Short-Term Futures ETN (VXX) which jumped by 1.6%. The fund, which tracks front-month VIX futures, was able to take advantage of choppy trading, as markets swayed back and forth until settling on a closing price in the red. Today’s gains bring VXX to losses of about 48% on the year, as the fund has been boasting a 5 day volatility of over 500%. While it may be an excellent trading tool, be warned that VXX can burn those who are not careful with it [see also Time To Buy VIX ETNs?].

The big loser today should come as no surprise, as the Financial Select Sector SPDR (XLF) lost 1.1%. With JP Morgan (JPM) as its second highest holding, and that stock losing nearly 10% on the day, XLF was able to keep its losses to a minimum through diversification. JP Morgan lost $2 billion on sour trades that were the fault of the institution itself, not a rogue trader. When asked if other banks were making this same mistake, CEO Jamie Dimon replied “Just because we’re stupid doesn’t mean everybody else was”, not quite the wording investors want to hear. Keep a close eye on both XLF and JPM in the coming days as more information unfolds.

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Disclosure: No positions at time of writing.