Tuesday ETF Wrap-Up: PBW Rises With Optimism, VXX Turns Lower

 |  Includes: PBW, VXX
by: Michael Johnston

by Daniela Pylypczak

Markets finally caught their break today, as positive reports from both sides of the Atlantic helped boost investors' confidence. When eurozone central bankers called for more unified efforts towards staving off sovereign-debt defaults, investor fears seemingly vanished, making yesterday's rapid and panicked sell off "old news". Optimism from the Federal Reserve helped bolster this renewed enthusiasm on Wall Street, pushing domestic equities into positive territory; the Dow Jones Industrial Average rallied 0.9%, while the S&P 500 and Nasdaq charged ahead with a 0.8% and 0.7% gain respectively.

On Tuesday, Federal Reserve Bank of Chicago President Charles Evans announced his expectations for the future of the U.S. economy, citing that he is "hopeful, but it could get rocky ". Evans further expressed his confidence in the strength of the U.S. economy and its continued resilience against the eurozone debt crisis, but stressed that further monetary stimulus should be made. The U.S. monthly budget statement was also reported Tuesday, coming in at -$124.6 billion, an alarming increase from previous $58 billion reported deficit.

The Invesco PowerShares WilderHill Clean Energy Portfolio (NYSEARCA:PBW) was one of the best performers, gaining 2.88% on the day. With uncertainty seemingly vanishing from the markets, this ETF surged higher as investors increased their risk appetites, shifting allocations towards more lucrative segments of the market.

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The Barclays iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX) was one of the worst performers, shedding 1.75% on the day. Revived optimism from eurozone bank officials, coupled with encouraging comments from Chicago's Fed President, helped quell investor fears and cool off market volatility. Despite today's drop, the Volatility Index (VIX) remains above the 20 mark, which suggests that uncertainty levels remain elevated.

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Disclosure: No positions at time of writing.

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