Eric Dutram: Equities had a rough start to the week as the market reacted quite poorly to Friday’s job report. Just 120,000 jobs were created in March 2012 according to the government, although the unemployment rate did decline to 8.2%. Private payrolls were especially poor as this figure missed expectations by over 120,000 jobs, calling into question the health of the economic recovery.
This report sent major benchmarks down by about 1% on the session while T-bills also continued their march higher after Friday’s gains. Commodity markets, however, were more mixed as most energy products tumbled, precious metals added a few points, while many soft products—such as orange juice and coffee—fell by a few percentage points on the day (see Three ETFs With Incredible Diversification).
In terms of ETF trading, several funds in the bond and sector categories saw outsized trading volumes as investors positioned their portfolios more defensively in light of the weak jobs report. On the other side of the trading volume spectrum, many products in the commodity and currency segments—in addition to a few emerging markets—saw light ETF trading volumes to open up the week.
One fund in particular that saw huge volume was the PIMCO 25+ Year Zero Coupon US Treasury Index Fund (NYSEARCA:ZROZ). The ETF usually sees trading volumes of about 28,000 shares a session but experienced a huge spike in Monday trading as nearly 400,000 shares changed hands on the day (read Is The Bear Market For Bond ETFs Finally Here?).
The ETF was one of the biggest winners from the weak jobs report as investors rushed into this product as protection. That is because this fund is one of the most sensitive there is to interest rate changes thanks to its zero coupon structure. In fact, the effective duration of the ETF is over 30 years suggesting that when bond rates tumble this is a big winner.
This definitely seemed to be the case today as ZROZ added nearly 3.9% in the session, pushing the product above the $100/share mark and to the top of the list of outsized volume securities on the day.
Another ETF that saw outsized trading volumes was the iShares MSCI Spain Index Fund (NYSEARCA:EWP). This ETF generally trades around 160,000 shares in a session but experienced volume of over 735,000 shares to open up the week (see Spain ETF Slumps On Weak Bond Auction).
This increase in volume was definitely bearish as the ETF lost about 1% on the day, pushing the fund near its 52 week low. The volume surge probably came as traders continue to fret over bond yields in the country, which are continuing to march higher and worry investors. Currently, rates are above 5.75% for mid-term Spanish debt, the highest level so far in 2012, forcing many investors to look at the country as the next possible PIIGS member to face trouble.
For more ETF news and analysis, make sure to check out the Zacks ETF center.
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