Tuesday ETF Wrap-Up: XLE Plunges, VXX Soars

Includes: VXX, XLE
by: Eric Dutram

After initially surging to start the day, equity markets slumped in the final hours of trading to push all of the major indexes lower to start the holiday-shortened week. The Nasdaq slumped by 1.5% while the S&P 500 fell by 1.7%. In commodity markets, oil sank by 2.4% and gold rose by 1% as investors sought the safe-haven metal as weakness permeated all sectors of the markets.

The slump in equity markets was largely due to continued concerns regarding the oil sector after BP failed to stop the devastating oil leak in the Gulf of Mexico. Adding to the industry’s misery, Attorney General Eric Holder said that the government was beginning civil and criminal investigations of BP over the oil spill; BP sank more than 15% on the report (see Oil ETFs Slide As “Top Kill” Fails, Obama Lashes Out).

The ETFdb 60 Index, a benchmark measuring the performance of asset classes available through ETFs, closed 11.36 points lower after another heavy day of trading. Tuesday’s sell-off was broad in scope, only six index components gained on the day.

One of the biggest gainers on the day was iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX), which soared higher by 5.6%. This sharp increase came after markets fell back deep into negative territory at the finish or trading. The S&P 500 traded in a 30 point range, a band of roughly 2.3%, which helped to bring fear back to the markets and push many traders to close out their positions before the day ended. Despite the gain on the day, VXX is still down 11.4% on the year; however, since the height of the market crisis roughly four weeks ago, VXX has managed to produce a gain of 42.3% (see more charts of VXX here).

One of the biggest losers on the day was Energy Select Sector SPDR (NYSEARCA:XLE), which sank by 4.8%. Although some of the fund’s top holdings such as Exxon Mobil and Chevron only posted modest losses of about 2%, its oil service components were not so lucky; many posted losses of more than 5% on the day. In fact, Anadarko Petroleum and Hailliburton, respectively the 6th and 9th largest components of the fund, were down 19.5% and 14.8% respectively, helping to send XLE sharply lower on the day (see more holdings of XLE here).

Disclosure: No positions at time of writing.

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