U.S. equity markets began the week on a down note, as all the major indexes slipped in Monday trading. The Dow and S&P 500 fell by 0.7% and 0.8%, respectively, while the tech-heavy Nasdaq slumped by 1.1%. Gold also retreated–albeit modestly–to the $1,316 mark, while oil held its ground above $85.60/bbl. Arguably, the only big winners on the day were the U.S. Treasurys, which saw yields fall and prices rise across all maturity levels; the yield on the 2 Year Note came dangerously close to hitting the 0.4% mark. This strength came after the greenback firmed, gaining modestly against the yen surging by over one cent against the euro.
Today’s weakness was thanks to worries over lackluster third-quarter earnings reports in a variety of important sectors. The steepest losses came in the technology and basic materials sectors, which were led on the downside by Intel, Microsoft, and Apple. Broad weakness haunted basic materials, which did not see a single S&P 500 component rise above 0.2% on the day. A key reason for the decline in materials was aluminum producer Alcoa, which sank by 2.5% after Deutsche Bank recommended selling shares of the company due to report earnings later this week. Meanwhile, Visa and Mastercard settled a suit with the Justice Department over an antitrust suit but American Express vowed to fight on, pushing shares down 6.5% in the process and helping to drag down some financial funds as well.
One of the biggest winners in the ETFdb 60 was the iPath S&P 500 VIX Short-Term Futures ETN (VXX), which soared by 1.9% in Monday trading. These gains were fueled by continued weakness in the U.S. equity market and a reasonably volatile day that saw the S&P 500 move within a 16 point range. The fund had slightly higher than average volume, coming in at 21.6 million shares. VXX has been surging higher over the last week of trading, with gains of 4.5%. However, despite these modest gains, VXX is still down sharply over the past quarter, posting losses of 42.1% and even more remarkable losses of 49% since the start of the year [see more fundamentals of VXX here].
One of the biggest losers on the day was the United States Natural Gas Fund (UNG), which fell by 2%. Today’s losses were fueled by increased concern over high inventory levels and weak demand projections thanks to warmer-than-expected temperature predictions in October and November for much of the country. “We have to wonder if we are ever going to see a rally in gas this season,” analysts at energy-advisory firm the Schork Group wrote in a research note. “We are waiting for it, but by current indications it is not happening.” UNG is now down close to 7.4% over the past week and has now fallen by 41% so far in 2010 as investors become increasingly bearish on the short and mid term future of the fuel and its role in the U.S. economy [see fundamentals of UNG here].
Disclosure: No positions at time of writing.