Watch Out Below: ETFs Endure Broad Sell-Off

Stocks and ETFs nearly retreated Tuesday to levels not seen in a decade as a shortened trading week got underway.

Dismal news from overseas, a looming deadline for automakers and continuing concerns about the health of financials all weighed heavily on the stock market, even as President Obama signed a $787 billion stimulus plan. To see a complete wrap up of the market click here. 

The SPDR S&P 500 (SPY) was the session's most heavily traded fund, with around 270 million shares switching hands. It was followed by the SPDR Select Financials (XLF), a fund that tracks the country's most prominent financial institutions. It plunged 8.4% as shares of companies like Citigroup (C) and JPMorgan Chase (JPM) decreased. However, during this volatile session 89 ETFs didn't trade a single share, according to data provided by Lipper. That's another indication the liquidation trend that quickened in 2008 could keep going into 2009.

Also on Tuesday Morgan Stanley released its quarterly ETF report. It shows 749 ETFs held $520 billion at the end of 2008. Despite taking in a net $175 billion last year, that total asset number is lower than previous years thanks to the downturn in the economy that has shrunk the value of ETFs across the board.

Outside of short-focused ETFs, gold funds were some of the select few offerings to post gains on Tuesday. Investors looking for a safe haven against the downturn pushed up the SPDR Gold Shares ETF (GLD) 3.1%. You can read a bullish case for investing in gold here.

Overnight investors were bombarded with a series of bad news from international markets. Japan announced its economy shrunk by 13% in the last quarter of 2008. Meanwhile, wire service reports mentioned Moody's may downgrade financial stocks with exposure to teetering Eastern European economies.

Market Vectors Russia (RSX), a fund whose component companies have strong ties to Eastern Europe, dropped 16%. The SPDR S&P Emerging Europe ETF (GUR) lost 14.2%.

Data Point

Our colleagues at Index Universe penned a story detailing the findings of a Strategic Insight report on ETFs. One big headline: ETF assets could hit $1 trillion in several years, essentially doubling the current asset base.

Earnings and Conference Calls
A.H. Belo, Agilent Technologies, Arbitron, Avanir Pharmaceuticals, Celera, Chesapeake Energy, Cognex, Daimler, Idenix Pharmaceuticals, Jack in the Box, La-Z-Boy, Medtronic, Republic Airways Holdings, Rick’s Cabaret International, Stone Energy, Teva Pharmaceutical, Transocean, Ultra Petroleum, Valmont, Wal-Mart Stores

Economic Data
8:30 a.m. Jan. Empire State Fed Manufacturing Survey
9:00 a.m. Dec. Treasury International Capital
1:00 p.m. Feb. NAHB Housing Index

A look at how the industry's most popular ETFs did on Tuesday.