Daily ETF Roundup: XHB Pops On Data, VXX Drops As Bulls Return

by on February 1, 2012 | ETFs Mentioned:

Stocks marched higher on Wednesday as investors rejoiced over encouraging fundamental economic data on all fronts. In the U.S., better-than-expected manufacturing and employment reports bolstered stocks higher; the Nasdaq led the way higher, gaining 1.22% on the day, while the Dow Jones Industrial Average lagged behind, inching higher by just 0.66%. Euphoria was further bolstered as Facebook filed papers with the SEC for an initial public offering, potentially worth somewhere in the neighborhood of $5 billion [see What Will A Facebook IPO Mean For ETFs]. Gold was flat for most of the session although profit-taking pressures prevailed in the end; futures prices for the precious yellow metal settled near $1,745 an ounce as the trading session drew to a close. On the home front, investors were happy to see that 170,000 private-sector jobs were added according to the latest ADP employment report. Additionally, confidence in the domestic recovery was boosted by growth in the manufacturing sector; the latest ISM figure came in at 54.1%, surpassing the previous reading of 53.1%. Motor vehicle sales were also robust in January, coming in at 14.2 million, and blowing away expectations of 13.5 million. Good news was abundant on the international front as well; China PMI manufacturing came in at 50.5, beating analyst estimates of 49.6, and creeping past last month’s reading at 50.3.

The State Street SPDR Homebuilders ETF (XHB) was one of the strongest performers, gaining 3.05% on the day, bolstered by encouraging developments in the U.S. housing market. The latest construction spending report beat analyst expectations after the figure came in at 1.5%, sailing past estimates of 0.3%, and trumping last month’s reading of 0.4%. XHB has been steadily advancing higher over the past few months as the U.S. housing market has showed signs of recovery; this ETF is up 12% year-to-date alone [see XHB Holdings].

The Barclays iPath S&P 500 VIX Short-Term Futures ETN (VXX) was one of the worst performers, shedding 2.72% on the day. Volatility evaporated from equity markets as investors digested robust manufacturing data on the home front as well as in China. Confidence in the economic recovery at home was further bolstered by a solid increase in construction spending [see Low Volatility ETFdb Portfolio]. David Sowerby, portfolio manager for Loomis Sayles & Co., commented, “The uncertainty in Europe has diminished. While corporate profits have been less robust, they are still growing. That’s what’s moving stock prices higher”.

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Disclosure: No positions at time of writing.