After slumping for much of the day in the wake of a weak jobs report–private employers added just 83,000 jobs–equity markets surged in the final hour of trading, only to fall back in the final 15 minutes. Oil continued its slide to finish down more than $6/bbl. for the week, while gold traded rangebound after its steep drop on Thursday. In addition to the weak jobs report, investors reacted to a poor factory order report that saw orders excluding transportation fall 1.4% in May–the biggest drop since March of 2009. These two pieces of news combined to increase the probability in many investors’ minds of a double dip recession heading into the third quarter. “This is back to the drawing board,” said Quincy Krosby, general strategist for Prudential Financial. “The market is pricing in a much more significant slowdown than the soft patch that we are in right now, and it may continue to price in something deeper and deeper than that.”
The ETFdb 60 Index dropped 3.06 points, or 0.3% on relatively light volume ahead of the holiday weekend. Losers outnumbered winners by about two-to-one, as most funds finished little changed.
One of the biggest gainers on the day was the iShares MSCI Brazil Index Fund (EWZ), which rose by 1.6% in Friday trading. This gain was largely due to a sharp uptick in sugar prices, which surged higher by more than 2.5%. Banco Bradesco and Itau Unibanco Holdings, two of the top six holdings of the fund, each posted big gains on the day. Additionally, a strong performance from Petrobras, the top component of EWZ at close to 20% of the fund’s total assets, helped to boost EWZ and send the prices sharply higher to end the week [see more holdings of EWZ here].
One of the biggest losers on the day was the United States Natural Gas Fund (UNG), which fell by 3% to close out the week. This came as traders sold contracts in a light volume day ahead of the three day weekend. Temperatures are also likely to stay mild for the foreseeable future, which along with the lack of hurricane activity in the Gulf has sent prices tumbling as of late. UNG has lost about 7% over the past two weeks [see more fundamentals of UNG here]. “Everybody’s looking back [at Thursday's rally] and realizing it was just really hot last week,” said Hamza Khan, an analyst with The Schork Group, a Villanova, Pa., energy advisory firm. “If we’re going to see milder weather for July, it doesn’t bode well for natural gas.”
Disclosure: Eric is long EWZ.