Despite weakness in the employment picture, U.S. equity markets managed to squeak by with gains to finish out the week. The Dow hung on to the 11,000 mark while the Nasdaq and S&P 500 both managed to finish higher, posting gains of 0.8% and 0.6%, respectively. Meanwhile, gold made back virtually all of its losses from the Thursday session, surging by $13/oz. while oil posted similarly robust gains and finished ahead by $1.2/bbl.
The major news of the day was the September jobs report, which showed that the American economy lost 95,000 jobs on the month, a far greater loss than the mere 8,000 jobs that economists were predicting. “We continue to show the economy crawling forward at less than 2% growth, enough to generate a handful of private-sector jobs but not enough to prevent the unemployment rate from rising,” said Nigel Gault, chief U.S. economist at IHS Global Insight. Although this news was bearish for the markets, many traders rallied around stocks and commodities on speculation that this gloomy report would force the Federal Reserve to act in its November policy meeting by greatly expanding its quantitative easing measures in an attempt to restart the struggling economy.
The ETFdb 60 Index, a benchmark measuring the performance of asset classes available through ETFs, added 8.14 points, or 0.8%. Winners outnumbered losers by more than five-to-one on the day amidst relatively heavy trading volume.
One of the biggest losers in the ETFdb 60 was the iPath S&P 500 VIX Short-Term Futures ETN (VXX), which sank by 4.7% to close out the week. Although VXX started off on a high note it quickly fell after speculation that the Fed would be forced to act in the near future grew. The fund also experienced another day of high trading volume; more than 32.7 million shares traded hands on Friday, more than 11 million more than the daily average for the popular ETN. Thanks to surging equity markets, VXX is now down 18.8% over the past month and down 41.4% over the past quarter [see more charts of VXX here].
One of the biggest gainers on the day was the PowerShares DB Agriculture Fund (DBA), which skyrocketed higher by 6.3%. These robust gains were propelled by surging prices for coffee and corn futures, which jumped by 5% and 6% respectively. Wheat futures also jumped sharply higher with the grain surging by 9.1% in Chicago trading and 8.4% on the Kansas City Board of Trade. These three commodities make up roughly one third of the total holdings of DBA, which had volume almost six times its average daily level as traders jumped into the commodity markets thanks to supply concerns and a weak dollar. Those factors combined to leave investors very bullish on the crops heading into 2011. The projected corn harvest plummeted by roughly 31 million bushels below analysts estimates, while the sugar crop in Brazil also fell well below expectations. These developments further extended these commodities’ incredible bull-run during late summer trading [see holdings of DBA here].
Disclosure: No positions at time of writing.