ETFs Record Big Drop as Trouble Spreads to Europe

Given that Friday Congress passed a historic $700 billion bailout plan of the financial-services industry, some investors probably came into the office Monday hoping calmer heads would prevail going forward. They quickly realized that wasn't going to be the case.

Over the weekend several European countries bailed out some of their ailing financial-services firms. Indeed, Germany announced the drastic step that it was guaranteeing all of its banks' consumer deposits. As markets opened Monday investor fears seemed to take over. U.S. stock markets dropped as soon as the opening bells were rung, despite some stocks looking tantalizingly cheap.

The Dow Jones Industrial Average slid almost 800 points during midday trading, one of the largest dives ever recorded. It regained 500 points in the last 90 minutes of trading before closing down 363 points to 9962. The Dow traded under the 10,000 level for the first time since October 2004. Twenty percent of the companies that trade on the New York Stock Exchange hit their 52-week lows.

Heading into the third-quarter earnings season, which starts Tuesday, investors were openly hoping for an interest rate cut by the Federal Reserve that would ease concerns of a global credit crisis.

Meanwhile, an all-out bidding war has broken out between Citigroup (C) and Wells Fargo (WFC) for the assets of Wachovia (WB).

Oil sold off in this latest severe downturn. Crude lost almost $5 per barrel to end at $89.

Gold seemed to be the day's only safe haven. It increased $25 an ounce to close at $859.

One of the only niches making money Monday was short-focused ETFs. Indeed, 29 of the top 30 performing ETFs bet on the market selling off. The ProShares UltraShort Basic Materials (SMN) advanced 11.3%.

As investors looked to trade risk for relative safety they sold off anything that seemed too aggressive. Emerging markets were particularly hard hit. Investors fretted that bailout plans -- not just in the U.S. but in home countries -- wouldn't be enough to stem a global credit crisis. Markets in Russia and Brazil were halted when they recorded big drops. The Market Vectors Russia fund (RSX) lost 18.6%. The iShares MSCI Brazil fund (EWZ) dropped 10.4%.

The third-quarter earnings season gets under way when Alcoa (AA) announces its results.

Earnings & Conference Calls

Tuesday
Acuity Brands, Alcoa, Centennial Communications, Premier Exhibitions, Safeway, Sealy, Team Inc., Yum! Brands

Economic Data

Tuesday
7:45a.m. ICSC Chain Store Sales
8:55a.m. Redbook Retail Sales
2:00p.m. Sept. 16 FOMC Minutes
5:00p.m. Aug. Consumer Credit

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