After a rough morning equity markets surged after lunch to post modest gains and reverse some of the losses suffered earlier in the week. The Dow squeaked by with a 20 point gain while the S&P 500 and the Nasdaq posted more robust gains of 0.3% and 0.8%, respectively. This turnaround in equity markets pushed investors out of Treasury bills, which finally saw yields head higher; the two year and the ten year notes both gained .04% on the day. Commodity markets also surged, with oil gaining more than $1.2/bbl and gold pushing through the $1,240/oz. mark.
Today’s early losses came after new home sales and durable good orders disappointed the markets and sent the Dow reeling by almost 100 points in the morning trading session. New home sales fell by 12.4% in July while durable goods orders grew less than expected, leading many investors to believe that the manufacturing sector would soon be following housing downward. Despite this rash of bearish data, many traders stepped in to buy up beaten down shares that have experienced quite the sell-off over the past few days; opportunistic buying helped to carry the markets higher despite overall weakness in the economy.
The ETFdb 60 Index climbed 2.25 points, or 0.2%, in a heavy day of trading.
One of the biggest winners on the day was the Market Vectors Gold Miners ETF (GDX), which soared higher by 3.4%. This sharp gain came after a weakened dollar drove up commodity prices across the board. Depressing durable good orders suggested a limited demand for capital goods, one of the few manufactured exports of the United States. This news helped to push gold back up within striking distance of its all-time high, which it looks likely to test if the economy continues to weaken. “Although there has not been a surge in renewed investor demand, many of the factors driving positive interest remain intact with fears over the shape of the economic recovery and low interest rates creating a gold favorable external environment,” said Barclays Capital analyst Suki Cooper. This boost in sentiment for the precious metal sent investors to GDX, often trades as a leveraged play on the price of gold [see holdings of GDX here].
One of the biggest losers in the ETFdb 60 was the United States Natural Gas Fund (UNG), which fell by 3.7% on the day. This came after a disappointing Energy Department report showed an increase of 4.1 million barrels to the nation’s oil stockpiles while gas inventories rose by 2.3 million barrels. While any increase in supplies can generally be considered bearish, these figures were especially bad since analyst expectations were for an increase of just 1.1 million barrels for oil, and a decline in gasoline stocks by 875,000 barrels. With analysts off by such a wide margin, it suggested to many that the economy was rapidly slowing down and that gas demand was likely to fall [see more charts of UNG here].
Disclosure: No positions at time of writing.