American equity markets fell off a cliff in Thursday trading as a number of factors–ranging from worries over Spain to unrest in the Arabian peninsula–sent stocks reeling. The Dow was down by over 228 points while similarly brutal losses were had in the more broad indexes. The S&P 500 declined by 1.9% while the Nasdaq slipped by 1.8% to cap off one of the worst days in the market since late August. Commodity markets also suffered, as all the major resource sectors sank on the day.
Among the worst losses were in the soft commodity market as coffee (down 4.9%) and sugar (down 5.6%) led the way lower. Given this backdrop, many investors shouldn’t be surprised to read that one of the few winners on the day was the U.S. dollar and the Treasury market, as traders fled to safe havens in order to ride out the storm.
One of the biggest losers on the day was the Energy Select Sector SPDR (XLE), which tumbled by 3.6% in Thursday trading. Today’s significant losses came as oil finally retreated off of its recent highs, tumbling by more than $2.1/bbl. in the session. This decline led to heavy weakness in the oil & gas sector as the fund’s top two components, Exxon and Chevron–which combine to make up roughly 30% of XLE–both sank by more than 3% on the day.
Heavy losses were also experienced beyond the integrated oil & gas market as a number of oil equipment firms such as Schlumberger and independent oil companies such as Occidental Petroleum also suffered large losses on the day. These sharp losses cap what has been a pretty solid run for the energy sector; the fund had risen by more than $10/share since the start of 2011 [see holdings of XLE here].
One of the biggest winners in the ETP world was the iPath S&P 500 VIX Short-Term Futures ETN (VXX), which soared by 5.2% on the day. Today’s spike was largely the result of a significant decline in equity prices and traders seeking refuge from risky assets. In times like these, demand for VXX–which represents the ‘fear index’–soars considerably.
In fact, today saw the fund attract volume in excess of 34.5 million shares, or more than 2.5 times its daily average. Thanks to rising fears in the marketplace, VXX has been on somewhat of a tear as of late. The fund is now up close to 19% over the past month and could continue its ascent higher if protests in Saudi Arabia materialise over the next few days [see fundamentals of VXX here].
Disclosure: No positions at time of writing.