U.S. equity markets had a choppy Friday to close out the week, as all the major equity markets managed to finish in positive territory despite a steep drop to start the day off. Oil again finished the day lower, this time by close to $1/bbl. as the U.S. dollar finished mostly flat against the major currencies of the world. Treasury markets also stayed rangebound, while precious metals continued to remain in focus; gold reached a new intra-day high of $1,284/oz. before slipping back to the $1,276 mark to close out the week.
Today’s choppy session saw large gains in some of the tech sector, led by a strong day out of Oracle. The company basked in the glow of its quality earnings report, which helped to propel the stock higher by close to 9%. However, the banking sector was not quite as lucky, as Bank of America lost over 1.1% and JP Morgan sank by 2.1% on continued worries over the state of the economy. “The market’s basically marking time here,” said Tom Samuels, managing director at Palantir Investments. “I don’t think there’s a lot of conviction out there and it makes it hard for the market to make a lot of sharp progress,” he said. “That’s why you’re having a lot of low volatility, low volume days.”
One of the biggest winners on the day was the PowerShares DB Agriculture Fund (DBA), which rose by 1% to close out the week. Today’s gains were fueled by rapid price appreciation in a variety of grain futures contracts, including corn and wheat; both commodities surged higher by more than 2% on the day. Corn prices rose on speculation that America’s harvest would not be as robust as first estimated, which helped to send prices up past the $5 a bushel mark. Meanwhile, wheat prices continued their surge as a weakened global supply–already diminished from the Russian wheat crisis–looked even tighter after a report that Canadian and Chinese crops would be hurt by a recent bout of cold weather in both of the nations. This news helped to send prices sharply skyward and helped to propel DBA, which has two of its top three allocations to to corn and wheat, higher on the day [see more on DBA's fact sheet].
One of the biggest losers was the SPDR Dow Jones International Real Estate Fund (RWX), which fell by 1.4% on the day. This steep loss was thanks in part to a large drop in the price of Unibail-Rodamco, which makes up the second biggest holding of RWX at 6.8%. Smaller names also saw broad weakness as investors pulled back from European and Japanese equity markets given the risks associated with each regarding the strength of their currencies going forward. These risks are now highlighted by bailout concerns for the Irish economy and further intervention in the currency markets by the Bank of Japan, which has helped to temper demand for foreign assets [see holdings of RWX here].
Disclosure: No positions at time of writing.