SPDR Jumps 32.3% in 2013

Last year was a banner year for U.S. stocks and the ETFs that tracked them.

• Large caps in the S&P500 SPDR (SPY) soared 32.3%, their best performance since 1997, topping the index’s 29.6% rally.
• Small caps in the iShares Russell 2000 (IWM) surged 38.7%.
• All U.S. sectors posted gains:
• Consumer Discretionary Select Sector SPDR (XLY) rocketed 42.7%.
• Health Care Select Sector SPDR (XLV) surged 41.4%.
• Industrials Select Sector SPDR (XLI) soared 40.5%.
• Financials Select Sector SPDR (XLF) jumped 35.5%.
• Consumer Staples Select Sector SPDR (XLP) rose 2.63%.
• Energy Select Sector SPDR (XLE) leapt gained 26.3.%.
• Materials Select Sector SPDR (XLB) advanced 26.0%.
• Technology Select Sector SPDR (XLK) climbed 26.3%.
• Safe haven Utilities Select Sector SPDR (XLU) did the worst, but still gained 13.0%.
• Outside the U.S., developed markets tracked by the iShares MSCI EAFE ETF (EFA) gained 21.4% as investors noticed Europe’s bargain valuations and Abenomics fueled a rally in Japan.
• However, the iShares MSCI Emerging Markets (EEM) lost 3.7% as the resource-dependent economies of Brazil and South Africa saw sizeable declines.

All results are total returns, with dividends factored in

Big ETF Moves on Goldman News

Exciting day on Wall Street as the Securities and Exchange Commission sends a shot across the bow of Goldman Sachs.

The stock market started out mildly higher, when midmorning, the SEC charged Wall Street’s most influential bank with fraud over its marketing of a subprime mortgage product designed to fail. The SEC says a Goldman vice president was also charged with fraud for his responsibility for creating the questionable mortgage product, known as ABACUS. Surprisingly, criminal charges were not filed.

However, this makes many question whether the bull run of the last year is over.

According to Reuters, the SEC alleged that Goldman structured and marketed ABACUS, a synthetic collateralized debt obligation that hinged on the performance of subprime residential mortgage-backed securities. However, Goldman allegedly didn’t tell investors “vital information” about ABACUS, including that the hedge fund Paulson & Co helped choose the securities in the portfolio. Run by John Paulson, the hedge fund made billions of dollars betting that the housing market would crash. The SEC also alleged that Paulson took a short position against the CDO in a bet that its value would fall, reported Reuters. “This included an estimated $1 billion from the transaction detailed in the SEC lawsuit, which the agency said cost other investors more than $1 billion,” said Reuters.

Many people on Wall Street have said this is a politically motivated moved as Congress begins debating reform of financial industry regulation.

Goldman denied the charges. Its stock fell $23.57, or 12.8%, to $160.70, and it brought down the entire market with the Dow Jones Industrial Average losing 126 points, or 1.1% to 11018.66. The S&P 500 dropped 19.5 points, or 1.6%, to 1192.13.

Obviously, this means a lot of movement among ETFs.

The Direxion Daily Financial Bear 3x (FAZ) jumped $1.14, or 10.3%, to $12.18, posting the third-largest volume of the market gainers, 209.7 million shares.

ProShares UltraShort S&P 500 (SDS) gained 94 cents, or 3.3%, to $29.72.

ProShares UltraShort Financials (SKF) jumped $1.15, or 6.8%, to $18.11.

The Financials Select Sector SPDR (XLF) fell 62 cents, or 3.7%, to $16.36.

ETFs See $635 Million in Outflows

Has the stock market peaked? According to Morgan Stanley’s ETF Weekly Update for April 5, ETFs saw outflows of $635 million last week.

U.S. large-cap ETFs posted the largest net outflows on both a one-week and 13-week basis. The SPDR S&P 500 ETF (SPY) was the primary driver of the move, posting the largest outflows for all U.S. listed ETFs on both the one-week, $1.8 billion, and 13-week basis, $7.3 billion. Going against the trend, the PowerShares QQQ (QQQQ) surprisingly had the largest one-week net inflow for an ETF holding U.S. assets, at $307 million.

Meanwhile, the two areas with the strongest net inflows are fixed income and international equity. With a 14% share, fixed income is now the third largest segment of the U.S. ETF market. The Vanguard Emerging Markets Stock ETF (VWO) posted the strongest net inflows for all U.S.-listed ETFs over the 13-week period, $2.6 billion.

On the short interest front, the iShares Russell 2000 ETF (IWM) saw the largest increase in short positions, up 6%, or 12.5 million shares, from 211 million shares on Feb. 26. The Financials Select Sector SPDR (XLF) saw the largest decline in short interest, falling 14%, or 22.8 million shares, from 158 million shares short as of Feb. 26.

Morgan Stanley says “first-to-market continues to be a big driver of success for new ETFs, and with the exception of ETFS Physical Swiss Gold Shares (SGOL), each of the most successful recent launches was the first ETF to market within a specific segment.” Four different asset classes are represented in the top 10 launches, with equity, fixed income and commodity each having three.

The report lists the most successful recent launches by assets.

• Market Vectors Junior Gold Miners ETF (GDXJ), with a market cap of $908 million.
• Market Vectors Brazil Small-Cap ETF (BRF), $693 million.
• ETFS Physical Platinum Shares (PPLT), $495 million.
• Vanguard FTSE All World ex-US Small-Cap ETF (VSS), $459 million.
• PIMCO 1-5 Year U.S. TIPS Index Fund (STPZ), $429 million.
• ProShares Short 20+ Year Treasury (TBF), $404 million.
• WisdomTree Dreyfus Emerging Currency Fund (CEW), $400 million.
• ETFS Gold Trust (SGOL), $360 million.
• SPDR Barclays Capital Convertible Bond ETF (CWB), $290 million.
• ETFS Physical Palladium Share (PALL), $251 million.

Over the last week, only four saw net inflows: ETFS Physical Platinum Shares ($16 million); PIMCO 1-5 Year U.S. TIPS Index Fund ($10 million); ProShares Short 20+ Year Treasury ($22 million); and WisdomTree Dreyfus Emerging Currency Fund ($2 million).