Equity markets were mixed in mid-week trading, as all the major American indexes finished flat after trending higher in the early part of the day and slumping back after Fed comments in the afternoon. Markets then surged higher in the final hour to leave stocks roughly where they started. Commodities were also range bound, with oil falling just below $77/bbl. and gold sliding by 0.5%. This choppy trading came after Intel reported robust earnings after the bell last night, which helped to send shares of the tech giant sharply higher to start the day. However, despite this report, markets sunk as the Fed trimmed its growth forecast down to between 3%-3.5% from its earlier forecast of 3.2%-3.7%. The central bank also gave a slightly higher figure for its prediction on unemployment rates, which it now predicts will fall to just 9.2%. These predictions led to a sharp sell-off in markets, but most shares managed to break-even to end the day despite the Fed-induced turmoil.
The ETFdb 60 Index, a benchmark measuring the performance of asset classes available through ETFs, rose less than a point, adding 0.1% on the day.
One of the biggest gainers on the day was the iPath S&P 500 VIX Short-Term Futures ETN (VXX), which jumped higher by 3.7% in Wednesday trading. This came after investors deduced from Fed reports that the economy is unlikely to get better anytime soon and that more volatility, and possibly bad news, is ahead. “The Fed is talking about 5 to 7 years time before the economy gets back to the old modus operandi,” said Joseph V. Battipaglia, market strategist for the Private Client Group at Stifel Nicolaus & Co. “This is the government admitting that the coast is not clear because the outlook is a slower environment and unemployment stays doggedly high.” [see more charts of VXX here]
One of the biggest losers in the ETFdb 60 was the United States Natural Gas Fund (UNG), which fell by 1.1% in today’s trading. This loss was also based on the low likelihood of a robust economic recovery in the U.S., as retail sales fell for the second straight month and the Fed gave a gloomier outlook for a recovery. Furthermore, natural gas supplies seem to be ample even despite the hot weather across much of the central and eastern United States. “You had one of the hottest starts to summer on record and yet you are sitting on these kinds of price levels,” said Cameron Horwitz, an analyst at SunTrust Robinson Humphrey Inc. in Houston. “I think it’s pretty telling” that storage levels are sufficient to meet demand in the near future [see more fundamentals of UNG here].
Disclosure: No positions at time of writing.