Equity markets were off to a rough start in Wednesday morning trading, but within an hour rose into a more positive mood that helped major indexes finish the day in positive territory. The Dow and Nasdaq both finished the day ahead by half a percent while the broad S&P 500 finished up by a more modest 0.4%. While it was a good day for equities, the other asset classes were not as fortunate; oil lost more than $1/bbl. in today’s trading and gold retreating by 0.2% off of its record highs as safe-haven demand waned. This trend carried over into the bond markets, which saw longer-term issues fall as yields on the 10 year note rose up to 2.72% while 2 year notes stayed firm and saw their yields drop below the 0.5% mark.
The big news in today’s session was Japan’s intervention into the currency markets in an attempt to halt the dramatic rise of the nation’s currency against the dollar. This sent the yen tumbling against the greenback by more than 3%, much to the delight of the large Japanese exporters that had been crushed by the runaway yen. While the mini-rally has left some optimistic on the outlook for global equity markets in the fall quarter, others are not so bullish and have pointed out how low volume continues to reign over the markets after the Labor Day break. “The summer malaise has turned into the fall malaise, and investors as a whole don’t seem too excited about the markets,” said Paul Nolte, managing director at Dearborn Partners. Markets seem stuck in a 5% range and it doesn’t appear as if anything in the short-term will pull them out of this choppy trading.
The ETFdb 60 Index added 0.99 points, barely keeping its winning streak alive as trading volume hit its lowest level of the week.
One of the biggest gainers in the ETFdb 60 was the United States Natural Gas Fund (UNG), which soared higher by 1.2% in today’s trading session. The gains likely came as a result of bargain buying, as natural gas demand hits its seasonal trough between the high demand periods for the fuel in the heat of summer and the cool of winter. Nevertheless, supplies remain robust and hurricane activity in the Gulf remains non-existent, so many traders are expecting price to remain at moderate levels going forward. “Bullishness should remain muted … unless tropical storms materialize into threats to Gulf production,” analysts with Barclays Capital wrote [see charts of UNG here].
One of the biggest losers on the day was the SPDR Barclays Capital International Treasury Bond Fund (BWX), which fell by 1.3%. Today’s losses were likely a result of muted demand for Japanese government bonds as the country attempts to deliberately weaken its currency. This weakness in Japanese yen likely caused a spillover into the government bond markets which saw higher yields and lower prices for a variety of issues. BWX’s top holding goes to Japan which makes up 22.5% of the fund’s total assets [see more information on BWX's fact sheet].
Disclosure: No positions at time of writing.