ETF Trading Report: Insurance, Utilities ETFs In Focus

Zacks

Stocks were generally positive to open up the week, although only modestly so as the Greek vote from over the weekend largely went as expected. Nevertheless, yields continued to rise in Spain and Italy, pushing rates for benchmark government debt up to, respectively, 7% and 6% in the two troubled nations.

Nevertheless, the S&P 500 rose by about 0.1% on the day, while the Nasdaq added 0.8% and the Dow was the outlier of the group falling by 0.2%. This was largely due to more weakness out of the banking sector while basic materials also slumped as well. On the other side, Apple continued to move higher while many firms in the services and health care space managed to add a bit in Monday’s session (see Play Europe with This ETF Pair Trade).

In currency trading, the dollar strengthened against most of the world’s major currencies, pushing the dollar index to just under the $82 mark. This was led by a one cent gain against the euro, as worries continue over the region’s trillion dollar economies, while the pound also suffered, falling by about half a cent against the greenback on the session.

Commodities were more volatile to start the week, led by big moves in the agricultural market. Many products, such as corn and wheat, added several percentage points thanks to the hot weather and its likely damage to the current crop. Meanwhile, most energy products slumped again today although natural gas bucked the trend, surging again by 7.4%.

Across the board in ETF trading, volume was light. This was somewhat surprising given the likelihood of volatility thanks to events in Europe, but many products saw underwhelming figures in terms of volume to open up the week. However, we did see some interest in a few commodity products, US sector ETFs, and large cap funds in Monday trading (read Time to Buy the Hedged Currency ETFs?).  

In particular, the insurance ETF sector saw a big boost in volume, led by the SPDR S&P Insurance ETF (KIE). This fund usually trades about 82,000 shares in a normal session but saw a spike to nearly 470,000 shares to start the week.

Volume was pretty well spread out throughout the day, although there were still a few big block trades in this ETF. Beyond that, investors should note that this ETF’s counterpart, the iShares Dow Jones US Insurance Fund (IAK), also saw an outsized day of trading activity to open up this week’s trading activity.

Interestingly, these high volume levels came at a time when the rest of the sector saw average to below-average levels of trading, suggesting that some investors are looking to position themselves in the space as opposed to big bank stocks or broker dealers (read Insurance ETFs: No Rebound in 2012?).

Another fund with a big day of volume was the Vanguard Utilities ETF (VPU). This relatively safe sector ETF usually sees volume around the 65,000 share level but spiked to nearly 490,000 shares during Monday’s session.

Interestingly, this came despite lackluster volume in many of the other utility ETFs despite those funds having similar holdings to VPU. Instead of a broad move into the space, like we saw with the insurance ETFs, this appears to be a few block traders moving en masse into this fund, as evidenced by a 107,200 block that moved hands in the afternoon.

Given this, it is more difficult to draw any conclusions from the move besides the fact that clearly to some investors, the safer segments of the economy—utilities and insurance—are still in demand despite the positive market performance over the last few days.

(see more in the Zacks ETF Center)

Read the analyst report on VPU

Read the analyst report on IAK

Read the analyst report on KIE

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