U.S. equity markets had a rocky Thursday as solid earnings figures were overshadowed by uneasiness over tomorrow’s crucial GDP report to send all the major indexes slightly lower for the day’s trading. This uncertainty helped to boost the demand for commodities which saw broad strength with oil and gold both jumping higher on the day. Precious metals also gained significantly with all four finishing higher by at least 1% and palladium jumping by close to $23/oz. to finish the day at $491 an ounce. “There is a shuffling of positions prior to tomorrow’s [gross domestic product] number, with investors getting positions in line and taking some risk off the table,” Dan Cook, senior market analyst at IG Markets, said of the session’s seesawing trade.
One of the biggest winners on the day was the United States Natural Gas Fund (UNG) which soared higher by 2.8%. This came after today’s weekly report on gas storage levels from the EIA showed a lower than expected build-up of supplies. Traders had expected a build-up of between 31 to 35 billion cubic feet but only 28 billion cubic feet were added which increased the bullish sentiment for the commodity. Natural gas looks to be in high demand as hot weather continues in much of the Northeast and Midwest however much of this has already been priced in. “Much of the buying came in yesterday and the the day before, so if you were going to buy on the [EIA] number, you would have bought yesterday,” said Hamza Khan, energy analyst at The Schork Group, about the price pullback, while noting many expected a lighter injection. “And we haven’t really received any other information to push prices higher today.” [see more charts of UNG here]
One of the biggest losers in the ETFdb 60 was the Utilities Select Sector SPDR (XLU) which fell by 1.5% on the day. This drop came after a utilities report which showed a lukewarm recovery for U.S. power use. U.S. power output fell for the second year in a row in 2009, the lowest since 2004. “We see a very soft recovery,” Exelon CEO John Rowe told analysts last week. “We tend to see our very large customers coming back; a little improvement in residential load. Small commercial and industrial load is very, very depressed,” Rowe said. This news combined with developments in Arizona and Nevada to sink utilities across the board who look to face new competition in the coming years for a stable, mature market. In Nevada, a 100 megawatt solar power plant has been approved which could produce power for 75,000 homes once it is finished. Additionally, in neighboring Arizona, the Arizona Corporation Commission is now requiring electric utilities to reduce the amount of power they sell by 22% by 2020 in order to help Arizonans cut back on power usage and become more energy efficient. Should these trends catch on it could spell bad news for the majority of the large utility firms in this ETF [see holdings of XLU here].
Disclosure: No positions at time of writing.