Thanks to a bond market closure for the Columbus Day Holiday, equities stayed relatively rangebound as the Dow hung on to the 11,000 mark. Both the DJIA and the Nasdaq managed to squeak by with gains on the day while the S&P 500 finished down one point in Monday trading. Commodities were again mixed and volatile as oil fell by close to 0.9% and gold pulled higher by 0.7% to close at another all-time record of $1,354/oz. Corn was a big gainer again today as the staple food source surged by more than 5.2% thanks to the residual impact from Friday’s shocking revision of the corn crop forecast.
Trading activity was light on Monday as investors awaited the FOMC minutes tomorrow afternoon in order to get a better grip on what the Fed might be planning to do at its next policy meeting in early November. Most sectors finished the day flat ahead of this report, but financials seemed to lead on the downside while services and basic materials helped to push markets higher. Look for activity to pick up tomorrow with the release of minutes from the latest Fed meeting and a slew of critical data releases. “There is a real competition between the glass-is-half-empty and half-full” points of view, said Sandy Lincoln, chief investment strategist at M&I Investment Management. “It’s still early in the reporting season, but so far two out of three companies are giving us positive earnings surprises. If that were to persist, it would be a pretty robust outcome.”
The ETFdb 60 Index managed to tread water on the day, inching up 0.28 points to start the week. Trading activity was light on Monday, with aggregate volume for index components barely topping 400 million shares.
One of the biggest gainers on the day was the Market Vectors Agribusiness ETF (MOO), which rose by 1.2%. These gains were driven by a solid day from the second biggest component of MOO, Wilmar International, which makes up 8% of the fund and surged higher by more than 3.2% during Monday’s trading session. The company, which is the world’s largest palm-oil trader, signed a mandate for a $1.1 billion term-loan facility to fund the purchase of Sucrogen Ltd. Wilmar also agreed to a A$600 million facility ($594 million) to fund general capital needs according to Bloomberg. This positive development, as well as robust crop prices, helped to send the agribusiness sector higher to finish the day and push MOO up close to 25% over the past 13 weeks of trading [see holdings of MOO here].
One of the biggest losers in the ETFdb 60 was the United States Natural Gas Fund (UNG), which tumbled by 1.4% to start the week. A similar theme –which natural gas investors should be well-accustomed to by now– helped to push down UNG during today’s trading session; robust supply levels and mild weather combined to limit demand for the heating fuel. This trend looks likely to continue as warm weather is expected across much of the Midwest and Northeast for much of next week. However, the recent downturn in UNG is more than just a series of short-term problems; some believe that the market simply has too much supply given the level of demand across much of the country. “The natural gas market is fundamentally oversupplied,” Morgan Stanley analysts wrote. “Unless and until producers are willing to pare back their drilling efforts, the North American gas market will remain in a fundamentally oversupplied situation.” [see more charts of UNG here]
Disclosure: No positions at time of writing.