Equity markets started the third quarter in much the same way they finished the second, as the Dow, Nasdaq, and S&P 500 all finished lower by roughly 0.4%. Commodity markets were especially hard hit, as gold tumbled close to $50/oz. and oil fell close to 4% on the day. These sharp drops in the commodity markets came as prospects for global growth were further called into question going forward. “The underlying fundamentals haven’t changed,” says Rick Mueller, director of oil markets at Energy Security Analysis in Wakefield, Mass. “There will remain a tremendous amount of crude available.” Another factor which has weighed on U.S. equity markets is the lack of job creation; the number of people filing for unemployment benefits rose, putting the four-week average for jobless claims up to its highest point since March. This is especially bad news for the more than 1.3 million people that have been left without federal jobless benefits after Congress adjourned without an extension of the program. That number could grow to 3.3 million by the end of the month if lawmakers can’t resolve the impasse when they return.
The ETFdb 60 Index fell 1.99 points, or about 0.2%, to start off the quarter. Trading was exceptionally heavy on the day, especially ahead of a long holiday weekend.
One of the biggest losers in the ETFdb 60 was the Market Vectors Gold Miners ETF (GDX), which fell by 4.5% in today’s trading. Gold prices sank as U.S. jobs data and Chinese manufacturing numbers disappointed, leading to a sell off in copper and silver as well. Many also cited a sharp retreat of the relative strength index (RSI) as a possible reason for gold bullion’s decline today.“The euro is key,” says Adam Klopfenstein, senior market strategist at Lind-Waldock. “The euro is getting more confidence behind it…a lot of the people that were buying gold off of the fears of the eurozone are dumping it.”
One of the biggest winners in the ETFdb 60 today was the United States Natural Gas Fund (UNG), which surged higher by 4.7%. This sharp uptick came after gas inventories rose five billion cubic feet less than expected. This surprise caused the deficit to year-earlier supplies to widen to 1% from 0.5% in the previous report. “You got pretty hot weather on the horizon and the market is rethinking the selling that occurred in the past few days,” said Teri Viswanath, director of commodities research at Credit Suisse Securities USA in Houston. “The market doesn’t want to be short through the long holiday.” This uptick reverses the downturn that UNG has been experiencing over the past two weeks, as the fund has lost 8.7% in the time period.
UNG will be in focus in coming weeks as hurricane season ramps up; expectations of a particularly active season had pushed up UNG prices last month, but Alex’s path away from major gas-producing regions caused the fund to sink last week [see Five Drivers Of UNG's Spring Rally]
Disclosure: No positions at time of writing.