A day after the Fed’s $600 billion dollar injection into the Treasury markets, U.S. equity markets stormed higher across the board. The tech-heavy Nasdaq finished ahead by 1.4% while the S&P 500 and the Dow both gained almost 2% on the day. In the Treasury markets, medium-term yields took a beating as the 10-year note fell 10 basis points to yield 2.48% and the 7-year note saw its yield sink by 11 basis points to the 1.71% mark. However, the big news on the day was the incredible surge in commodity markets; gold skyrocketed by over $54/oz. while oil finished the day up $2/bbl.
Today’s surge, which helped to push equities up to pre-Lehman Brothers collapse levels, came as global equity markets reacted to the Fed’s bond buying campaign and rumblings of inflation concern were once again heard. The dollar continued its tumble against other major currencies, giving a boost to commodity prices in the process. The biggest advances on the day included a 4.9% gain in coffee futures, 5% gain in sugar, and a 7.3% surge in silver futures. “QE2 was a green light to buy everything commodities and sell [the] dollar,” said Zachary Oxman, managing director for TrendMax Futures as the U.S. dollar index fell by half a percent on the day.
The ETFdb 60 Index surged 17.03 points, or 1.5%, in Thursday trading. Only three components failed to post a gain on the day, as commodities, bonds, and stocks all surged in unison. Volume was once again heavy, as traders increased activity after a slow start to the week.
One of the biggest gainers on the day was the Market Vectors Gold Miners ETF (GDX), which surged higher by 4.8% in Thursday trading. Today’s dramatic surge came as gold prices surged to a fresh record high on escalating concerns over the Federal Reserve’s program and its effect on the inflation rate. “The QE news came in as expected and it’s still very inflationary for the dollar and really bullish for gold,” said Fred Schoenstein, metals trader with Heraeus Precious Metals Management. These expectations helped to push gold up to $1,392/oz. a gain of 4.1% on the day, news that sent shares of the world’s biggest gold miners soaring higher. Among the leaders were AngloGold, which jumped by 5.5%, and Kinross Gold, which soared by 5.8%; both are among the top ten holdings of GDX [see holdings of GDX here].
One of the biggest losers in the ETFdb 60 was the iPath S&P 500 VIX Short-Term Futures ETN (VXX), which plummeted by 6.9% on the day. Today’s losses continued the tumble for the popular volatility hedge, which suffered at the hands of the near 2% pop in the S&P 500. Once again the fund experienced extremely high levels of volume–close to 45.5 million shares, well above the fund’s average of 24.5 million but slightly lower than yesterday’s 50 million share trading day. This drop extends the fund’s dramatic fall as VXX has now lost 14.3% over the past week and 30.8% in the past month [see more charts of VXX here].
Disclosure: No positions at time of writing.