After staying relatively flat for much of Wednesday’s trading, equity markets slumped after Federal Reserve Board Chairman Ben Bernanke announced that the outlook for the economy is “unusually uncertain” and that the Fed is at the beginning stages of considering new easing steps to boost the economy. “We remain prepared to take further policy actions as needed to foster a return to full utilization of our nation’s productive potential in a context of price stability,” Bernanke said in his report to Congress. Once this report hit the wire, markets fell almost 1% in a matter of minutes, with the S&P 500 sinking by 1.3% and the Nasdaq falling by close to 1.6% on the day. This bearish report also sent the U.S. Treasury yields tumbling; the 10 Year Note fell below 2.9% and the 2 Year fell to 0.56% as investors scooped up fixed income securities in order to avoid riskier markets.
The ETFdb 60 Index, a benchmark measuring the performance of asset classes available through ETFs, sunk 7.23 points, or 0.7%. Most equity components finished lower, as losers outnumbered winners by almost three-to-one.
One of the big winners on the day was the iPath Dow Jones-UBS Copper ETN (JJC), which jumped by 1.6%. This boost came despite weakness in many sectors of the market as one of the largest copper miners in the world, Freeport McMoran, reported better than expected quarterly earnings. The company beat estimates by 12 cents a share, posting profits of $1.40 on revenues of $3.86 billion thanks to higher metal prices across the board. Freeport’s CEO, Richard Adkerson, also said that he felt very positive about the longer-term outlook for copper, which helped to boost JJC in today’s trading [see more fundamentals of JJC here].
One of the biggest losers was the iShares MSCI Pacific Ex-Japan Index Fund (EPP), which fell by 2.2% on the day. This sharp drop came as investors sold off the developed markets in Asia on fears of a prolonged slowdown in the U.S. market. “Investors are reluctant to make significant bets amid mounting economic uncertainties,” commented investment holding company 3V Research. EPP is heavily focused on Australia (65% of assets) with large allocations also going to Hong Kong (20%), and Singapore (14%). These three markets can all count the U.S. as one of their top five export destinations. Despite today’s drop, the fund is still up more than 12% over the past 52 weeks [see more charts of EPP here].
Disclosure: No positions at time of writing