The U.S. equity markets began last week on a positive note led by easing tensions between Russia and Ukraine, a ceasefire agreement in Gaza and some encouraging corporate news as well. However, geopolitical developments remained the dominant market driver and major benchmark indexes shed some of their earlier week gains on Friday following fresh conflict in Ukraine. Ukraine forces partly destroyed a Russian armored column after it entered Ukrainian soil.
Nonetheless, benchmarks recorded their second straight week of gains and all the three major benchmark indices closed the week on green, with the Dow up 0.7%, the S&P 500 gaining 1.2% and the tech laden Nasdaq climbing 2.2%. A recovering U.S. economy, improving corporate earnings picture and a strengthening jobs market led the U.S. markets higher despite the ongoing geopolitical tensions.
Notably, the Q2 earnings season has been quite reassuring; the pace of negative revisions for this quarter as well as for the upcoming quarters has been quite low this time. This is in stark contrast to previous quarters when negative revisions were a recurrent theme.
Moreover, worries about the timing of an interest rate hike continued to plague investors. Though most believe the hike to come in mid-2015, some of the bullish economic data out recently raised speculations of an earlier-than-expected rate hike.
On the global front, the Euro-zone GDP came in on the weaker side further confirming that the region’s economy is losing momentum. Also, a consumption tax hike in April led the Japanese economy to shrink 6.8% at an annual rate during Q2.
Given the mixed sentiments, most of the ETFs emerged as winners last week, while a few products also slumped to close the week on a negative note. Below, we have highlighted some of the big gainers and losers from the week:
UBS E-TRACS Alerian MLP Infrastructure ETN (MLPI - ETF report) – Up 6.24%
Most of the MLP ETFs numbered among the top gainers last week, thanks to Kinder Morgan Inc’s (KMI - Analyst Report) mega-consolidation news. The company said it will combine all its publicly traded master limited partnerships under one roof – thereby creating the largest energy infrastructure company in North America and the third largest energy company worldwide (read: MLP ETFs Soar on Kinder Morgan Consolidation Plan).
This caused most MLPs including MLPI to record gains last week. MLPI tracks the Alerian MLP Infrastructure Index holding a small basket of 25 energy infrastructure MLPs. Enterprise Products Partner, Kinder Morgan Energy Partners and Plains All American Pipeline occupy the top three spots with a combined exposure of more than 25%.
The fund has amassed $2.2 billion in its asset base while it trades in good volumes of roughly 249,000 shares a day. The fund gained 6.24% last week and is up 17.8% so far this year. The expense ratio came in at 0.85%.
Market Vectors Biotech ETF (BBH - ETF report) – Up 4.9%
After a rocky summer, most of the Biotech ETFs re-emerged as winners last week due to bargain hunting, with the Nasdaq Biotech Index up 4.6% last week.
This fund tracks the Market Vectors US Listed Biotech 25 Index, holding 26 securities in the basket. The product has so far amassed $511 million in its asset base and sees moderate trading volumes of roughly 75,000 shares a day.
Gilead occupies the top spot, followed by Amgen and Celgene. The fund has gained 4.9% in the past one week and is up 15.4% since the start of the year. It has a Zacks ETF Rank of 3 with a Medium risk outlook (read: Biotech Earnings Put These ETFs in Focus).
PIMCO 25+ Year Zero Coupon US Treasury Index Fund (ZROZ - ETF report) – Up 4.2%
Given the current market turmoil, Treasury bond ETFs remained one of the top choices for investors among the list of global safe havens. The fund tracks the BofA Merrill Lynch Long Treasury Principal STRIPS Index, focusing on treasury principal STRIPS that has 25 years or more of final maturity.
The fund holds 21 securities and focuses on long-term bonds with both effective maturity and effective duration of 27.31 years. The fund gained 4.2% last week and is up 32% since the start of the year (read: 3 Safe Haven ETFs to Beat a Summer Slowdown).
C-Tracks on Citi Volatility Index ETN ((CVOL - ETF report)) – Down 23.49%
Volatility ETFs, linked to the CBOE Volatility Index or the VIX, were the biggest losers last week as investors seemed confident of a recovering economy going forward.
CVOL with an asset base of under $5 million and average trading volume of over 50,000 shares turned out to be the major loser last week, shedding as much as 24%. The fund tracks the Citi Volatility Index Total Return to measure directional exposure to the implied volatility of large cap U.S. stocks.
Apart from this, other volatility products such as iPath S&P 500 VIX Short-Term Futures ETN (VXX) and VelocityShares Daily Long VIX Short-Term ETN (VIIX) also lost in the double digits.
First Trust ISE-Revere Natural Gas Index Fund (FCG - ETF report) – Down 2.8%
Milder temperatures lately have restrained Americans’ use of air conditioning, leading to higher stockpiles and causing natural gas prices to fall sharply. As such, FCG lost 2.8% last week and is down 8% for the past month (read: Can a Heat Wave Turn Around the Natural Gas ETF?).
FCG tracks the ISE-Revere Natural Gas Index to track companies that derive a substantial portion of their revenues from the exploration and production of natural gas. The fund manages an asset base of $480.9 million and trades in good volumes of more than 450,000 shares.
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