Although markets sank in early trading, equities soon recovered their losses and soared to close out the day. The Dow rose by 42 points as the Nasdaq and S&P 500 again posted more impressive gains of 0.8% and 0.6%, respectively. Meanwhile, commodities continued their recent streak of weakness as gold tumbled by 1.1% and oil sank by 0.9% on the day, despite a moderately weaker dollar. Treasuries on the other hand had a strong day as yields retreated broadly across a variety of maturity levels.
Despite modest gains across much of the market, there were a few big losers on the day. FedEx, the delivery giant which reported earnings earlier today, posted a 18% drop in Q2 profits and missed revenue targets, helping to sink the bellwether by 2.2% in Thursday premarket trading. However, traders then focused in on news that the holiday season was going better than expected and that the company was raising its outlook for the quarter, propelling shares higher by close to 2% on the day. “FedEX is seeing costs to ramp up capacity for increased demand, and facing headwinds to reinstate compensation and 401k matches,” said Standard & Poor’s Equity Research analyst Jim Corridore. “But revenue, volumes and yield trends are strong.” Meanwhile, major credit card companies Visa and Mastercard both experienced broad weakness on the day as the Federal Reserve proposed rules to curb debit card fees significantly. According to the Fed, the average interchange fee is about 44 cents but the central bank would like to limit the fees at just 12 cents, a move that would severely cut into major debit card companies’ fees. Both of the giants were down more than 10% on the day as a result of this proposal and were among the biggest losers in the S&P 500 for Thursday trading.
One of the biggest gainers on the day was the iShares Dow Jones Transportation ETF (IYT), which gained 1.3% on the day. Today’s gains were the result of the bullish outlook from top holding FedEx, which raised its full year guidance on record holiday shipments. “We’re now more bullish about the remainder of the year based on our record-setting peak volumes and greater anticipated customer demand for our services,” said Chief Executive Fred Smith on a Thursday conference call. “We believe consumer and business sentiments are improving.” This news helped to push up the rest of the transport sector as well; UPS gained roughly 2% and the major railroads gained roughly 1% in Thursday trading.
One of the biggest losers in the ETFdb 60 was the United States Natural Gas Fund (UNG), which plummeted by 4.9% in Thursday trading. Today’s drop came after traders sold off the popular heating fuel after the government’s weekly storage report showed that supplies were reduced by 164bcf, in line with estimates. Despite this relatively large drawdown, supplies still stand at a robust 4.56tcf, or roughly 10% above the five-year average level. That helped to send UNG, which has endured a brutal 2010 from a performance perspective, sharply lower on the day. “In the span of one week, we’ve shed over 10% because storage is a dark cloud over the market,” said Jay Levine, of Enerjay LLC. “And with these bitter-cold temperatures throughout much of the country, the market was disappointed in an as-expected withdrawal.” [see fundamentals of UNG here]
Disclosure: No positions at time of writing.