After surging to start the day, equity markets dipped back in the final few hours of trading back to basically break even during Tuesday’s session. The Dow and the S&P 500 both finished the day in the red, while the tech heavy Nasdaq managed to finish the day in positive territory, posting a gain of 0.2%. While oil finished the day below $77/bbl., precious metals soared higher with gold rocketing towards $1,270/oz. and silver rising to the $20.40 mark. This flight to safer assets also impacted Treasury bonds, which saw yields reverse much of recent gains; the two-year note fell back to the 0.5% mark.
It appeared as if markets would be off to another solid day as U.S. retail sales beat out analyst predictions and rose 0.4%, the highest monthly gain in five months. This positive sentiment was further corroborated by the earnings report from Best Buy which, showed a better-than-expected profit and a higher outlook for the rest of the 2010 [see more on this story in Tuesday's ETF To Watch]. However, markets sank back as a report came out showing that close to 100,000 homes were repossessed during August, a new record. “With respect to the (Notice of Default) increase, I think it is the modification redefault wave beginning to build and new modifications slowing to a trickle, indicating banks have lost their primary borrower re-leveraging tool,” says mortgage industry consultant Mark Hanson.
The ETFdb 60 Index climbed 1.86 points, or 0.2%, in relatively heavy trading.
One of the biggest losers in the ETFdb 60 was the iPath DJ-UBS Copper ETN (JJC), which fell by 1% in today’s trading session. These losses are likely due to the poor housing data and a bearish outlook from Goldman Sachs, which left many traders worried over the industrial metal which has its fortunes tied to a growing and health economy. Currently, close to 28% of world copper production is used in construction and 42% is used in electrical applications, so a continued downturn in housing is likely to heavily impact JJC going forward [see more charts of JJC here].
One of the biggest winners on the day was the Market Vectors Gold Miners ETF (GDX), which surged by 3.6%. This large gain was due to the jump in gold prices, which rose by close to $23/oz. in Tuesday trading on fears over the health of the economic recovery and the prospect of further quantitative easing measures by the Federal Reserve. This speculation led to a weaker dollar, which helped to drive up the demand for a host of precious metals which have traditionally benefited from increased market uncertainty. “Safe-haven demand is continuing as there are increasing doubts about the robustness of the recent economic recovery and concerns that markets may be subject to further turmoil,” said Mark O’Byrne, director of Dublin-based bullion dealer GoldCore [see holdings of GDX].
Disclosure: No positions at time of writing.