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Wall Street Sees Worst Day in 8 Months: ETF Winners & Losers

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Wall Street suffered its worst day in more than eight months as spike in Treasury yields dampened the appeal for riskier assets. The 10-year Treasury yield has climbed about 17 bps over the past seven days. This has sparked fears of a faster-than-expected rates hike that would lead to tighter financial conditions and thus derail economic growth.

When interest rates rise, bonds become more viable and attractive alternatives to equities. Additionally, U.S.-China trade war, Hurricane Michael’s landfall in Florida and mid-term election in November added to the woes.

The Dow Jones Industrial Average and the S&P 500 suffered their worst one-day slump since Feb 8, falling more than 3% each while the Nasdaq Composite Index logged in its worst one-day decline of 4.1% since June 2016. Notably, the S&P 500 marks the longest losing streak in two years and all of 11 sectors closed down.

With this slide, the Nasdaq shed 8% in the first eight sessions of the fourth quarter, representing its worst start to a quarter since the first three months of 2016 and the worst start to a fourth quarter since 2008, per Dow Jones Market Data. The Dow Jones tumbled 3.3% reflecting the worst start to a fourth quarter (read: 7 Leveraged/Inverse ETFs Off to a Strong Start in October).

Market Impact

The hot and soaring technology segment went into a freefall with the S&P Technology sector tumbling 4.8%. Investors have been shifting their focus away from growth-fueled strategies to value and defensive stocks. Amazon (AMZN - Free Report) has been the biggest drag plunging 6.2%, its worst one-day loss since 2016 while Apple (AAPL - Free Report) dropped 4.8% in yesterday session.

While all the tech ETFs saw terrible trading, Advisorshares New Tech and Media ETF (FNG - Free Report) stole the show, tumbling 6.8%. Global X Fintech Thematic ETF (FINX - Free Report) and 3D Printing ETF (PRNT - Free Report) saw decline of 5.8% each.

The communications services, consumer discretionary, energy and industrial sectors also dropped more than 3%. Energy ETFs saw steep declines as SPDR S&P Oil & Gas Equipment & Services ETF (XES - Free Report) and Invesco Dynamic Oil & Gas Services Fund (PXJ - Free Report) dropped 6.1% and 5.8%, respectively. XES has a Zacks ETF Rank #3 (Hold) while PXJ carries a Zacks ETF Rank #4 (Sell) (read: ETFs That Tend To Win & Lose When Rates Rise).

The CBOE Volatility Index (VIX), also known as the fear gauge, jumped 44% to 22.96 — the highest close since April 2. This is the first time since April 11 that the fear index has gone above 20. As a result, volatility ETFs outperformed in yesterday’s trading session with iPath Series B S&P 500 VIX Short-Term Futures ETN (VXXB - Free Report) gaining 16.7%. VelocityShares Daily Long VIX Short-Term ETN (VIIX - Free Report) and ProShares VIX Short-Term Futures ETF (VIXY - Free Report) was also up 16.5% each.  

Gold and gold-mining ETFs were up on investors’ drive to safe haven assets. Acting as leveraged plays on underlying metal price, gold miners witnessed more gains than their bullion cousins. That said, iShares MSCI Global Gold Miners ETF (RING - Free Report) gained the most, rising 1.8%, while Market Vectors Gold Mining ETF (GDX - Free Report) climbed 1.3% (read: Gold in Longest 4-Year Losing Streak: Go Short with ETFs).

Defensive sector such as utilities and consumer staples lose less as these act as a safe haven amid market turmoil. Stocks in these sectors generally provide higher returns in troubled times. Utilities fell 0.5% while consumer staples lost more than 1%.

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