U.S. equity markets finished their amazing September on a down note, as all of the major indexes declined modestly in the last day of trading in the third quarter. The Dow fell by 0.4% while the Nasdaq and the S&P 500 both slipped by 0.3%. In commodity markets, gold finally ended its run-up as it declined by close to $20/oz. before ending the day back close to the $1,310 mark. Meanwhile, oil managed to continue its recent bull run finishing the day just shy of the the important $80/bbl. level, a mark unseen since early August.
Markets rose to start the day thanks to a better than expected weekly jobless claims report and a slight upward revision in Q2 GDP growth–up to 1.7%. However, investors soon resorted to profit taking in order to lock in some of the gains of the stellar September in equity markets. The majority of the weakness was in the big tech names such as Apple, IBM, and Oracle, all of which sank by at least 1% on the day. Investors also booked profits in the health care and consumer goods sectors which also experienced broad weakness; Pfizer fell by 1.3% while Colgate-Palmolive slid 1.9%. Nevertheless, equity markets managed to post their best September in 70 years, a fact which has helped to boost some investors’ confidence heading into the fourth quarter, especially given the somewhat rosy manufacturing data out of today’s Chicago PMI report ahead of Friday’s ISM manufacturing survey.
The ETFdb 60 Index, a benchmark measuring the performance of asset classes available through ETFs, slid by 1.7 points, or 0.2%. Trading on Thursday was the heaviest of the week, as the third quarter ended on an active note.
One of the biggest gainers on the day was the iShares MSCI Brazil Index (EWZ), which rose by 1%. This modest gain came thanks to strength in the top component Petrobras and moderating inflation reports from the Brazilian central bank. The predicted rate for consumer price index inflation was revised down to 5% from 5.4%, and the bank lowered its projection for 2011 IPCA inflation to 4.6% from 5%. This news eased investor concerns over further rate increases in Brazil and look likely to force the bank to keep rates steady for the foreseeable future [see charts of EWZ].
One of the biggest losers in the ETFdb 60 was the United States Natural Gas Fund (UNG), which sank by 2.6% on the day. This was a result of the weekly EIA storage report, which showed that inventories grew by 74 billion cubic feet last week, slightly higher than the predicted increase of 69 bcf. With no storm threats in the Gulf and moderating weather across much of the country, air conditioning and heating demand looks be limited while supply disruptions look to be mild, a combination that is likely to cap UNG’s price going forward. “It’s a classic case of oversupply,” said Jay Levine, president of Enerjay LLC in Portland, Maine. “Natural gas is being weighed down by a combination of supply and depressed enthusiasm because of the economic malaise we’re in.” [see fundamentals of UNG here]
Disclosure: Eric is long EWZ.