Thursday ETF Roundup: XLF Jumps, VXX Continues Slide

Includes: VXX, XLF
by: Eric Dutram

U.S. equity markets continued their surge in Thursday trading, as solid retail numbers helped to keep the bullish sentiment going for the second straight day. The Dow posted another triple digit gain while the Nasdaq and the S&P 500 surged by 1.2% and 1.3%, respectively. Most commodities– besides gold– had a decent day, as softs continued higher and oil finished at the $88/bbl. mark. Thanks to a decline in the dollar index and renewed interest in risky assets, bond yields jumped, with the Ten Year Note’s yield up to 3%.

The big news on Thursday came after the ECB decided to leave in place a liquidity safety measure for vulnerable banks, helping to ease investor fears over a pullout by the Frankfurt-based central bank. In fact, it appears as if the central bank has begun a campaign to buy up sovereign debt in some of the weaker members, such as Portugal and Ireland, in an attempt to prevent the debt contagion from spreading. Closer to home, U.S. retail sales rose by 5.8% in November despite the fact that many shoppers claimed to need to do more in order to finish up their holiday season purchases. “The fact that consumers are still further behind on their shopping bodes well for December performance and suggests a stronger than expected holiday shopping season in total,” said Michael P. Niemira, chief economist for ICSC. This news helped to lift a variety of retail names and propel markets to solid gains on the day.

One of the biggest ETF winners on the day was the Financial Select Sector SPDR (NYSEARCA:XLF), which surged by 2.5%. Today’s gain was largely due to an upbeat outlook by Goldman Sachs, which boosted its outlook for the U.S. financial sector. The investment bank lifted its rating for financials to ‘overweight’ for the first time since the financial crisis began in late 2008. “Stronger economic growth, higher equity prices, and a more supportive interest-rate environment are positive for many subsectors of financials,” company analysts noted in the report. This news was further backed up by a 10% rise in pending home sales which helped to boost sentiment in the beaten down real estate segment of the market as well.

One of the biggest losers in the ETFdb 60 was the iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX), which tumbled by 7.8% in today’s session. These severe losses came as the S&P 500 posted another smooth, upward sloping session helping to limit demand for the main fund tracking the ‘fear index’. Thanks to today’s slide, VXX is now down 10.3% over the past month and has sunk close to 50% over the past quarter.

Disclosure: No positions at time of writing.

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