American equity markets started the week off on a high note, as the bulls rode equities sharply higher in Monday trading. The Dow and S&P 500 both surged by 0.7% while the Nasdaq gained 0.5% on the day, which helped to push the major indexes up to within striking distance of their 2010 highs. Although the dollar was relatively flat against the world’s major currencies, commodities bounced back in Monday trading as gold jumped $4/oz. and oil rose by nearly $2/bbl. Despite increased optimism over the financial situation and rising asset prices, investors continued to buy up longer-term Treasurys, possibly in anticipation of further quantitative easing measures from the Federal Reserve. This pushed five year notes down to 1.13% and ten year bonds down to 2.51% on the day.
Today’s gains were powered by a solid performance out of DJIA component Citigroup (C), which reported net income of $2.2 billion on earnings of seven cents a share. The report beat out analyst expectations, which called for earnings of six cents a share and handily beat out the year ago quarter which produced a loss of 23 cents a share. “Achieving our third straight quarter of positive operating earnings is continued evidence that we are successfully executing our strategy and we believe we have put in place all the elements for continued profitability,” said CEO Vikram Pandit. This news–combined with solid tier one capital ratios for the firm of 10.3%–helped to boost the financial sector as a whole and soothed investor fears over the long-term health of the company.
One of the biggest gainers on the day was the Select Sector Financial SPDR (XLF), which surged by 2.3% on the day. XLF surged higher thanks to the robust earnings report from top five component Citigroup and was also buoyed by good news out of Bank of America as well. The banking giant reported that it is resuming foreclosures in 23 states and restarting the process on close to 102,000 cases. This news helped to calm investors who were growing increasingly worried about fallout from a possible foreclosure scandal and the resulting costs to resolve the problems. BAC surged by 3% on the day and was followed higher by a 2.8% gain from JP Morgan and a 5.6% gain from Citi [see more holdings of XLF here].
One of the biggest losers in the ETFdb 60 was the United States Natural Gas Fund (UNG), which sank by 2.1% to start the week. Today’s losses continued UNG’s spiral downwards but came at the hands of an unlikely source: Haliburton. The oil service company reported earnings today which more than doubled previous profits to just over half a billion dollars. The company highlighted robust drilling activities on the mainland, especially for natural gas, as one of the chief drivers of this surge in profits. Thanks to this push to drilling for petroleum in underground shale deposits, vast quantities of natural gas have been found over the past year, suggesting that weakness in prices for the popular heating and cooling fuel are likely to stay for the foreseeable future [see more on UNG's fact sheet].
Disclosure: No positions at time of writing.