After staying flat for much of the trading session, equity markets fell in the final hour to finish the day lower. The Dow reported modest losses of 0.4% while the S&P 500 and the Nasdaq showed steeper losses of 0.7% and 1% respectively. Commodities finished the day flat as investors bought up T-Bills and pushed the yield back down to the 3% mark on the 10 year note. This flight to quality came after the Fed released its Beige Book in which it reported modest gains across all 12 of the Federal Reserve districts. “Manufacturing activity continued to expand in most districts, although several districts reported that activity had slowed or leveled off during the reporting period,” the Fed said in the report. While, manufacturing and industrials had been some of the strongest sectors of the economy, it now appears as if that strength may be waning as durable goods orders fell by 1% last month, compared to expectations of a 1% gain. This news, along with the Fed’s report, sent manufacturers lower and tempered many investors’ expectations for Friday’s GDP numbers.
One of the biggest winners on the day was the PowerShares DB Agriculture Fund (DBA) which surged higher by 1.5%. This jump came after coffee and sugar futures jumped by more than 2.2% each on supply concerns. Traders were especially worried over a supply bottleneck in top producer Brazil and uncertainty over monsoon rains in the top consumer, India. Cocoa futures were also sharply higher as rain and a crop disease threatened the output of the world’s top exporter, the Ivory Coast. After slumping for much of the first part of the year, DBA has surged higher in recent weeks posting a gain of 7.3% over the past month [see holdings of DBA here].
One of the biggest losers in the ETFdb 60 was the Select Sector Fund- Health Care SPDR (XLV) which fell by 1.4% on the day. This drop came after weakness in health care earnings which saw Hospira beat analyst estimates to the tune of $.86 cents actual to $.79 cents estimated, but the company failed to raise its 2010 earnings forecast which indicated weakness to many traders, especially considering the company’s robust second quarter performance. “With strong second-quarter EPS outperformance, unchanged guidance could imply a worse second half than we currently model,” Leerink Swann analyst Rick Wise wrote. This news sent shares of the company tumbling by more than 8% which pushed the firm to a near two-month low in terms of share price and sent the broader health care sector down as well [see fundamentals of XLV here].
Disclosure: No positions at time of writing.