Equity markets continued their slide in Monday trading, as all major indexes suffered significant losses to start the week. The Dow fell by 140 points to end the day just above the 10,000 mark while the Nasdaq and the S&P 500 both dropped by close to 1.5%. This fall once again pushed investors into the relative safety of precious metals and Treasury bills, which both saw prices soar in today’s trading. Copper hit a four month high while silver reached a two month high; meanwhile the 2-year T-bill yield fell back to the 0.5% mark while the 10 year note fell below 2.5%, underscoring the lack of investor confidence in any meaningful recovery. “The market is having a bit of a temper tantrum, saying businesses should step up and start hiring people or we need one more shot of stimulus,” said Burt White, chief investment officer at LPL Financial.
The ETFdb 60 Index, a benchmark measuring the performance of asset classes available through ETFs, slid 6.9 points, or 0.7%. Trading was light on the day, with losers outnumbering winners by more than two-to-one.
One of the biggest gainers on the day was the United States Natural Gas Fund (UNG), which soared higher by 2.6% despite overall weakness in the markets. This sharp gain to start the week was thanks in large part to predicted temperatures of over 90 degrees for much of the Midwest and Northeast, including 94 degrees in New York City and 96 in the nation’s capital. This helped to reverse the recent downward trend of UNG as investors bid up the commodity in anticipation of higher demand levels for electricity use. “The relentless storms and the warm weather has the market rethinking the short side,” said Michael Rose, director of trading at Angus Jackson Inc. in Fort Lauderdale, Florida. “Right now, the focus is on the heat and the hurricanes rather than the oversupply and no demand.” [see charts of UNG here].
One of the biggest losers in the ETFdb 60 was the iShares MSCI Brazil Index Fund (EWZ), which fell by 2.6% in today’s trading session. These losses were largely due to weakness from top component Petrobras, which slid thanks to weaker crude oil prices and a report indicating that the company may have to pay more than previously estimated for government reserves; initial reports estimated the costs to be about $6.50 a barrel but the Brazilian President has called for fees of about $10 instead. Petrobras makes up close to 18.5% of the total holdings of EWZ, and its shares declines by close to 2.9% in Monday trading in New York [see more holdings of EWZ here].
Disclosure: Eric is long EWZ.