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Top ETF Stories of February

Zacks Equity Research

The start of February was no different from January with the stock market moving erratically and finally paring down some of the massive losses to close out the month. Overall, the month gave a mixed show, with the S&P 500 index and Nasdaq Composite losing about 0.4% and 1.4%, respectively, and the Dow Jones Industrial Average advancing 0.4%. Safe havens prevailed in the month on a spike in volatility. Notably, the S&P 500 index recorded the third-successive monthly loss, representing the ‘longest losing streak since 2011’.

 

Oil toyed with stocks throughout the month. Market movement was mainly in tandem with oil price flows. Apart from oil, there were a few events which played a crucial role in regulating investors’ sentiment in February. Let’s take a closer look at the top ETF stories of February.

 

Negative Interest in Japan

 

The Bank of Japan (BoJ) pushed key interest rates in the negative territory. While the move should have weighed on yen, the currency actually got a boost from the safe haven appeal. As a result, yen ETF CurrencyShares Japanese Yen (FXY) added over 7.3% in February (read: Top and Flop Currency ETFs YTD).

 

Blow to Bank ETFs

 

The global financial sector fell victim to the energy sector crash and global growth worries in the month. First, UBS Group AG’s (UBS) moderate earnings for the fourth quarter of 2015 and then JP Morgan’s indication of a bumpy first-quarter on a double-digit fall in investment banking revenues and a $500 million rise in provisions for expected losses on energy loans hinted at awful capital market activity for the banking sector, going forward (read: Bank ETFs in Trouble?).

 

Also, the negative interest rates policy in Japan and Euro zone put pressure on net interest margins. The Fed is likely to take a slower rate hike trajectory, if it hikes at all in the near term. This made MSCI Europe Financials Sector Index Fund (EUFN) and SPDR S&P Regional Banking ETF (KRE) two of the worst-performing financial ETFs last month. EUFN and KRE were off over 5.4% and 3.6%, respectively, in the month.


Technology ETFs Tatters

 

This is yet another area which took a beating in February.  High beta pain, overvaluation concerns, earnings recession and global growth worries crushed the space. Investors seem to have lost faith in the broad-based emergence and adoption of high-growth tech areas like Internet, social networking and clouds. DWA Technology Momentum (PTF) and iShares North American Tech-Software ETF (IGV) were among the biggest tech losers (4.1% and 2.5% respectively) in the month (read: Bubbles Bursting For Technology ETFs?).

 

Gold Continues to Dazzle

 

Gold, one of the ultimate safe assets, shined on investor demand in February. As fears gripped the markets, the commodity got its sparkle back. February was the best month for gold since January 2012. As a result, the biggest gold bullion fund SPDR Gold Shares (GLD) rose 9.8% in February (read: Best ETFs to Play Gold Now - Metal or Miners?).

 

Treasury Bond ETFs: A Treasure Trove

 

As safety was the keyword in the market in February, U.S. Treasury bond ETFs surged for a legitimate reason. The Treasury yield curve fell to the flattest level since November 2007. In February, yields on the 10-year Treasury note tumbled 23 bps to 1.74%. While almost all Treasury ETFs outperformed in the month, US Treasury 10-Year Bull ETN (DTYL) stood out with more than 7.7% returns in the month.

 

Inverse Equities Rule

 

Needless to say, as the stock market tanked, inverse equities’ ETFs hogged investors’ attention. In February, UltraShort Nasdaq Biotechnology (BIS), UltraPro Short QQQ (SQQQ) and Short MSCI EAFE (EFZ) were up over 8.5%, 3.1% and 2.9%, respectively.

 

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CRYSHS-JAP YEN (FXY): ETF Research Reports
 
ISHARS-MS EU FN (EUFN): ETF Research Reports
 
SPDR-KBW REG BK (KRE): ETF Research Reports
 
PWRSH-DW TEC MO (PTF): ETF Research Reports
 
ISHARS-NA TEC-S (IGV): ETF Research Reports
 
SPDR-GOLD TRUST (GLD): ETF Research Reports
 
IPATH-UST 10YBL (DTYL): ETF Research Reports
 
PRO-ULS NDQ BIO (BIS): ETF Research Reports
 
PRO-ULS QQQ (SQQQ): ETF Research Reports
 
PRO-SH MSCI EAF (EFZ): ETF Research Reports
 
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