Once again, U.S. equity markets surged in early trading only to suffer a setback in the final hours of the day. However, today’s session saw markets come back in the final fifteen minutes to power back to gains across the board. The Dow finished the day up by close to 50 points while the Nasdaq and the S&P 500 both posted more modest gains of around 0.1% in Tuesday trading. In commodity markets, energy fell across the board while softs and grains also retreated broadly in the session. The big story continued to be in the Treasury market were yields marched higher yet again as every bond level beyond five years gained at least .10% in terms of yield.
The biggest news on the day came from Best Buy, which reported a surprisingly weak quarter on the back of declining demand for many of its high profile electronic devices. The retail giant saw its shares plummet by close to 15% on the news, as market share fell by 1.1% with stiff losses in the important TV and gaming markets. This news led many to believe that a holiday recovery may not be in the cards, or that if consumers started to buy it would be in small targeted purchases. Meanwhile, the Federal Reserve met in order to discuss its opinion on the status of the economy and give an update on its easing measures. The Fed reaffirmed that their plan to buy $600 billion in U.S. Treasury debt would be subject to regular reviews and may be adjusted depending on future economic data, and gave no indication that they would be changing the policy at any time in the near future. This news helped to continue the Treasury market’s recent weakness and propel yields sharply higher across the board in the bond markets.
One of the biggest winners in the ETFdb 60 was the iShares Dow Jones U.S. Telecommunications Index Fund (IYZ), which rose by 1% on the day. Today’s gains came as a result of solid gains from the fund’s top two holdings, AT&T and Verizon, which both jumped more than 1.5% on the day. The companies have both benefited from a rapid increase in smart phone adoption and many analysts are coming to the conclusion that the two will both benefit from the iPhone’s appearance on the Verizon network. “We believe the iPhone will arrive on Verizon’s shelf sometime early in 2011 … Although we expect losses of at least 2.2 million subscribers to the Verizon iPhone … AT&T could have a net positive impact on earnings due to the early termination fee revenue,” said analysts at Nomura Equity Research, who gave a ‘buy’ rating to AT&T and a ‘neutral’ rating to Verizon. The fund is now up 16% so far in 2010, including a 4.4% gain over the past two weeks [see holdings of IYZ here].
One of the biggest losers on the day was the United States Natural Gas Fund (UNG), which tumbled by 3.1% in Tuesday trading. Today’s losses came thanks to a warmer outlook across much of the nation and massive supplies still flooding the market. “The large consuming metropolitan regions such as New York and Chicago are likely to be returning to normal consumption trends by about this time next week and into the final week of the year,” said Jim Ritterbusch, of energy advisory firm Ritterbusch and Associates, in a client note. This news looks likely to temper demand and could cap the popular heating fuel’s recent rise in prices [see fundamentals of UNG here].
Disclosure: No positions at time of writing.