Equity markets surged on Friday to post the fourth straight weekly gains for major American indexes. The Dow gained close to 200 points in the day while the Nasdaq and the S&P 500 rose by 2.3% and 2.1%, respectively. Gold flirted with the $1,300/oz. mark and finished the day ahead by $1/oz., while oil also jumped higher to finish the day ahead by 1.8% thanks to increased demand for risky assets. The greenback experienced broad weakness on the day as the U.S. dollar index fell by 1.1% and Treasury yields soared across the board.
Today’s bull market run came despite weak housing data which showed flat levels of home sales right before the market opened. However, markets managed to stand their ground on this news and rallied after the government reported that non-defense capital goods orders jumped by more than 4% in August, or twice what analysts were expecting. “Last month investors were positioned for what we thought would be a double-dip recession and massive inflation, but since it ended up being not nearly so bad, we’ve swung the other way,” said Lawrence Glazer, managing partner at Mayflower Advisors in Boston.
The ETFdb 60 Index soared higher by 12.56 points, or 1.2%. Winners outnumbered losers by about three-to-one as aggregate trading in index components was once again on the heavy side.
One of the biggest gainers on the ETFdb 60 was the Vanguard European ETF (VGK) which rose by 3.4% during Friday trading. Investors in VGK can thank a strengthening euro, which gained more than 1% against the dollar, and moderating fears over a European collapse for today’s robust gains. The main catalyst was a jump in the German IFO business climate index which rose to a three-year high, suggesting that citizens in Europe’s largest economy are increasingly confident about the future. “Today’s IFO defies any double-dip concerns for the German economy,” said Carsten Brzeski, senior economist at ING Bank in Brussels. [see holdings of VGK here].
One of the biggest losers on the day was the United States Natural Gas Fund (UNG), which fell by 3.1%. Today’s losses came thanks to declining worries over the impact of Tropical Storm Matthew, which meteorologists now believe has a low chance of hitting the Gulf. Commodity Weather Group pegged the chances at about 15% in a note to clients, but cautioned that “there is very low confidence on tracking or intensity” for the next five days, according to the Wall Street Journal. This news helped to cancel out the lower-than-expected boost in total natural gas in storage in yesterday’s report, and left the fuel down 4.8% over the past week [see more charts of UNG here].
Disclosure: No positions at time of writing.