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ETF News And Commentary

American stocks started the week on a down note as more concerns over Europe weighed on the markets. A coalition government seems unlikely to form in Greece suggesting that a new election will have to take place, adding more uncertainty to the already precarious situation.

As a result, all the major American indexes were down again in Monday trading with the Dow falling by 1.0% and the Nasdaq and S&P 500 slumping by 1.1%. Losses were pretty broad throughout but the energy and financial segments were among the biggest losers led by heavy losses in the major banks and multi-percentage point drops in many oil equipment and independent oil producers.

Thanks to this decidedly risk off trade, the U.S. dollar saw inflows across the board with the Dollar index rising to the $80.65 level. This was led by strong gains against the euro currency and helped push the 10 year note down to the 1.78% yield level as a safe haven investment to start the week (read the Guide to Small Cap Emerging Market ETFs).

With this dollar strength and move away from risky assets, it was another rough day for commodity markets as well. All the major energy products finished the day lower by at least 1%, while metals and most of the softs finished the day sharply in the red as well. Seemingly, only a few softs and grains managed to hang on to positive territory but these were the exception and not the rule in Monday trading.

In the ETF trading world, volume was relatively moderate across the space as most funds saw trading in-line with historical levels. Seemingly, the most activity was in the leveraged, sector, and international markets as these corners of the financial world dominated the scene during Monday’s session.

In particular, investors were drawn to the iShares Dow Jones US Insurance ETF in Monday’s session. This ETF usually sees volume of about 17,400 shares but saw a spike to 143,000 in today’s volatile trading (Read Insurance ETFs: No Rebound In 2012?).

The vast majority of the trading came in the morning hours although a few large blocks did dominate the volume during this time period. The ETF was down about 1.6% on the day but this was far better than many other financial products which suffered at the hands of the big banks which continued to decline to open up the week.

As a result, some of the volume may be due to investors positioning their financial allocations away from the broad space and to the safer corners of the industry. With growth and blend firms only comprising roughly 1% of the portfolio, IAH could be a decent avenue to do this in while still maintaining exposure to the financial space.

Another ETF that saw huge trading volume in Monday trading was the First Trust NASDAQ 100 Equal Weight ETF . This product usually trades about 50,000 shares a day but saw a large spike up to 186,000 shares to start the week (see Three Tech ETFs Outperforming XLK).

This bump in volume was largely due to a few spikes in interest during the early part of the day led by a 53,000 share block around 11:34am. Thanks to this, a few smaller blocks over the next hour, didn’t even trade over a 1.5 hour period in the middle part of the session suggesting that the volume was very concentrated.

Nevertheless, the product appears to have been a better choice for those looking to gain access to the Nasdaq today thanks to its heavier focus on small cap securities. This approach ensured that the fund was down just 0.8% on the day compared to a 0.9% loss for the large cap focused in the session.

(For more ETF trading information see the Zacks ETF Center)

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