Sharp Selloff Spins ETFs Back Down

Stocks and many exchange-traded funds gave back their gains and then some Friday after investors backed away from a one-day jump on solid GDP growth numbers Thursday.

As the U.S. dollar jumped in value, investors parsed the Thursday results from the Commerce Department and weighed the effects of government spending on the 3.5% jump for September, sending major indexes down slightly at the market open. The Dollar Index rose almost 0.66%, and the CBOE Volatility index hit a three-month high, climbing nearly 25% in one day.

The Dow Jones Industrial Average closed down 250 points to 9713. The Nasdaq shed 52 points to 2045 and the S&P 500 dropped 30 to close at 1036. The Dow closed the month flat, and it was the first down month for the Nasdaq since February.

The whipsaw back down came a day after a government report of better-than-expected economic growth sent stocks soaring with the biggest gains in more than three months. Thursday's surge snapped a slump earlier in the week.

The volatile end of the week, coupled with a pending meeting of the Federal Open Market Committee, which sets interest rates, heightened uncertainty at the Friday close. But other investors said the spate of triple-digit swings is simply a reflection of the jerky nature of the recovery.

"The market doesn’t have a brain and it’s hard to predict what’s going to happen with something that doesn’t have a brain," said Frank Ingarra, a co-portfolio manager at Hennessy Funds.

Oil prices slipped as the dollar rose in value against other currencies. As of 4:03 p.m. Friday, front-month crude futures traded on the Nymex were down $2.88 at $76.99. For a detailed rundown on Friday's trading session see our market story. 

The iPath Exchange Traded Notes S&P 500 VIX Short-Term Futures Index (VXX) rose 14.9% for the week, propelled by the triple-digit swings in the Dow and big moves in other indexes on Thursday and Friday. As most stock gains for the week were wiped out Friday, the iShares Barclays 20+ Year Treasury Bond fund (TLT) hung on for a 1.4% gain for the week.

Pushed by plunging commodity stocks, the Market Vectors Russia fund (RSX) shed 11.3% for the week. The SPDR S&P Metals & Mining fund (XME) dropped 10.2%.

Launching Pad
A new exchange-traded fund that will invest only in Oklahoma-based companies, mostly in the energy sector, began trading Thursday. The OOK fund (OOK) will track the SPADE Oklahoma Index, made up of Oklahoma-based companies with a minimum market capitalization of $100 million. As of Sept. 30, the index posted year-to-date gains of 37.8%. The index of 29 companies is weighted, but no single company can account for more than 10% of the fund portfolio. The fund charges an annual expense ratio of 0.85%.

UBS on Thursday launched its UBS E-TRACS Dow Jones-UBS Commodity Index Total Return exchange-traded note (DJCI), which tracks the Dow Jones-UBS Commodity Index, a broadly diversified index of 19 commodity futures. The fund charges an annual expense ratio of 0.50%. The DJ-UBS index has lower exposure to energy than other commodity indexes, and more exposure to the agricultural market.

Discount brokerage Charles Schwab (SCHW) filed a fee schedule with the Securities and Exchange Commission for its new family of exchange traded funds, set to launch before the end of the year. Schwab plans to offer eight ETFs originally, with the new U.S. Broad Market fund (SCHB) and U.S. Large Cap fund (SCHX) charging a below industry average fee of 0.08 percent. Its Schwab Emerging Markets Equity (SCHC) and Schwab International Small Cap (SCHE) funds will be the most expensive, with fees of 0.35%.

Van Eck filed a request with the Securities and Exchange Commission to launch an exchange-traded fund linked to Indian small-cap companies. It will track the Market Vectors India Small-Cap Index in the same manner as the recently launched Market Vectors Brazil Small-Cap fund (BRF). No ticker has yet been assigned for the proposed fund.

The Jeffries Thomson Reuters/Jeffries CRB Global Agriculture Equity Index fund, and Jefferies Thomson Reuters/Jeffries CRB Global Industrial Metals Equity Index fund begin trading Tuesday on the New York Stock Exchange. The agriculture fund will track the results of an index based on producers of seeds, traits (seed characteristics attained through genetic modification), chemicals and fertilizers, farm machinery, equipment and irrigation, agricultural products, and livestock and aquaculture, according to its prospectus. The industrial metals fund will track a proprietary index linked to production and extraction of metals used in industrial production.

A pair of Index IQ exchange-traded funds based on the CPI Inflation index and a global resources index begins trading Tuesday on the NYSE. Index IQ last month announced plans to launch 15 funds based on its indexes, using hedging strategies based on the performance of its indexes. The IQ CPI Inflation Hedged fund and IQ Arbitrage Global Resources funds will be based on the same approach as the IQ Hedge Multi-Strategy Tracker ETF, which began trading earlier this year, the company said.