U.S. markets had a rocky Wednesday trading session, which saw stocks dip in morning trading only to fall lower in the afternoon. However, the Dow and the S&P 500 both managed to make back their losses before the closing bell, as the Dow posted gains of 0.2% and the S&P fell slightly by 0.1%. The tech-heavy Nasdaq was not as lucky though; it plunged by 0.8% on the day thanks to bearish warnings in the software sectors. Commodities managed to post another strong day, with gold hanging on to its $1,350/oz. level and silver finishing above the $23/oz. mark as investors continued to sell-off the dollar on speculation that the Fed will increase its quantitative easing program in the near future.
This mixed trading was thanks in large part to weakness from the private sector on the jobs front; payroll organization ADP reported that employment levels fell by 39,000, a sharp decrease compared to somewhat rosy predictions of a 20,000 job increase for the month. “Today’s ADP report provided further evidence that the summer slowdown in the economy is still having a tangible negative effect on the jobs market,” said Jim Baird, partner and chief investment strategist for Plante Moran Financial Advisors. Meanwhile, the tech sector sank on news from Equinix (EQIX), which tumbled by close to 33% as the data-center hosting service company cut its sales expectations for the third quarter. This helped to push down a variety of tech names in the S&P 500 including Red Hat, NetApp, Salesforce.com and Citrix, which all sank by at least 6.7%.
The ETFdb 60 Index inched higher by 1.19 points, or 0.1%. Trading was down slightly from Tuesday, as investors pulled back ahead of important data releases later in the week.
One of the biggest winners in the ETFdb 60 was the United States Natural Gas Fund (UNG), which soared higher by 2.8% on the day. These gains were likely due to traders covering their short positions ahead of tomorrow’s crucial weekly gas storage report. Today’s gains help to balance out some of the fuel’s short-term weakness in what is usually one of the most temperate times of year across much of country. That generally limits fuel demand for both cooling and heating, and contributed to the near 8% drop in UNG over the past two weeks. However, this could all change with tomorrow’s report on the weekly inventory drawdowns or buildups. “The storage report probably holds the key to our price direction,” said Pax Saunders of Gelber & Associates in a note to clients. “Today’s short covering could be unraveled by a big number.” [see more fundamentals of UNG here]
One of the biggest losers on the day was the iShares MSCI Brazil Index Fund (EWZ), which fell by 1.3% in Wednesday trading. This drop was a result of a tax increase imposed on the country’s foreign investors who buy bonds and other fixed income instruments in an attempt to prevent the real from increasing in value. The tax will jump from 2% to 4%, and while it does not directly impact the stock market, investors are growing fearful that this move will not help stop the real’s rise and that the government will be forced to implement more drastic capital controls in order to maintain control over the currency. “There’s growing interest from foreign investors in Brazil and this latest decision is geared to avoid the appreciation of the Real and harm to our exports” said Finance Minister Guido Mantega. “We are concerned that a steep increase in the value of the Real hampers exports and floods the domestic market with cheap prices” [see holdings of EWZ here].
Disclosure: Eric is long EWZ.