Daily ETF Roundup: DBA Continues Surge, EWJ Sinks

by on October 12, 2010 | ETFs Mentioned:

Equity markets stayed in a holding pattern for the early part of Tuesday’s trading session as investors awaited news regarding the Fed’s minutes from last month’s policy meeting. Once these were released in the afternoon, stocks jumped initially higher on hopes that the Federal Reserve would extend its quantitative easing program in an attempt to help boost the markets. This news pushed the Dow up by 0.1% and the broader indexes markedly higher; the S&P 500 jumped by 0.4% while Nasdaq surged by 0.7%. Meanwhile, commodity markets were relatively flat while the Treasury market slumped after its long-holiday weekend.

Equity markets were boosted by the Fed’s minutes, which indicated that several members though that it would “soon” be the right time for the next round of quantitative easing. Some had wanted to begin the easing program at last month’s meeting but chose to wait in order to gather more data and better plan policies going forward. “What the Fed said today didn’t surprise anybody,” said Bill Vaughn, portfolio manager at Evercore Wealth Management. “Most people thought the comments were going to lay the groundwork for quantitative easing and they essentially did that.”

The ETFdb 60 Index inched higher on Tuesday, adding 0.79 points as winners and losers were roughly split.

One of the biggest gainers in the ETFdb 60 was the PowerShares DB Agriculture Fund (DBA), which jumped by 2% today. Today’s robust gain was powered by surging coffee, corn, and sugar futures which were up 4%, 4.2%, and 3.2%, respectively. These three commodities combine to make up close to 37% of the fund’s total assets and have powered DBA to a 9.4% gain over the past week as crop concerns have combined with a weak dollar to send a variety of commodities higher. DBA once again experienced high levels of trading–this time a 73% increase over the normal daily average–which helped to push the short-term volatility up to 78.9%, suggesting that volatile price swings are likely to continue in the commodity markets in the near future [see fundamentals of DBA here].

One of the biggest losers on the day was the iShares MSCI Japan Index Fund (EWJ), which sank by 0.9% on the day. This loss came after continued weakness in the dollar against the yen, with the exchange rate dropping below 82 yen per dollar during Tuesday trading. The fund also saw weakness from a number of its top components including a 1.5% loss for top holding Toyota Motor and a 1% drop for Mitsubishi UF Financial Group. However, the main issue going forward looks to be the yen’s resiliency and how this is beginning to impact the large exporters. “There is going to be a tug of war between the dollar’s weakness and wariness about further Japan intervention (in the currency market),” Mizuho Securities equity strategist Tsuyoshi Segawa told Dow Jones Newswires [see holdings of EWJ here].

Disclosure: No positions at time of writing.