ETF Expert

For roughly 6 months circa 9/10/2008 – 3/9/2009, the market averaged a 1% gain or loss each day. Of course, most of those particular sessions were losses for the investing public!

Yet volatility has come back down to earth from the stratosphere. Now… we may be accustomed to 1% moves on a single day… but are we really accustomed to seeing 100 point swings 2 days in a row?

At one moment on 1/20/10, Mr. Market had given up 200 points… or close to 2%. However, the Dow clawed, kicked and scratched its way back to a “respectable” finish.

Here’s how 7 leading segments fared:

1. Energy Select SPDR (XLE) lost -1.56%. Equipment/Services dragged on the energy segment, as did the drop in the underlying commodities (oil and gas).

2. Basic Materials SPDR (XLB) lost -1.78%. The market hammered miners, metals and anything remotely related to the China demand trade. China’s decisions to boost reserves held buy banks and raise short-term bill rates is seen as slowing down demand for infrastructure industries.

3. Health Care SPDR(XLV) lost -0.85%. The loss is a bit deceptive in light of the reality that many components like pharmaceuticals and medical supplies barely gave up any ground. (Not to mention that health care was the leading segment the day before.) Call it pre- and post- “Brown euphoria,” as the election of the senator changes the face of health care reform.

4. Financials Select SPDR (XLF) only lost -0.26%. Banks collectively closed the day out with gains, due to a B of A upgrade and a strong earnings report from Wells Fargo. Were it not for the drag of insurers, Mr. Market’s most volatile sector might actually have turned “green.”

5. Technology Select SPDR (XLK) lost -1.61%. Buy the rumor, sell the fact? How else might one explain Intel and IBM being punished for phenomenal earnings.

6. Consumer Staples Select SPDR(XLP) lost -0.45%. Staples stayed true to the its low-risk reputation. Kraft’s purchase of Cadbury sapped some of the strength from an otherwise well-capitalized, conservative collection of companies.

7. Utilities Select SPDR (XLU) lost -1.03%. It’s just not as safe as it used to be! The high debt levels that power plants, water facilities and gas distributors currently carry has made “grandma’s portfolio” a bit riskier than in the past. Of course, Bill Gross of Pimco has hinted that it might be the only equity sector worthy of your dollars.

If you’d like to learn more about ETF investing… then tune into “In the Money With Gary Gordon.” You can listen to the show “LIVE”, via podcast or on your iPod. If you’d like to subscribe to ETF Risk Alert, click here.

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