U.S. equity markets experienced a rocky start to the week in Monday trading as sharp losses in the early part of the day were more or less erased by a solid afternoon session. The Dow, which at one point was down more than 150 points, finished the day lower by just 25 while the S&P 500 slumped by two points on the day. Meanwhile, the Nasdaq managed to post a small gain on the day rising by 0.6% despite broad weakness in other markets. In commodities, oil finished slightly lower while the precious metals resumed their ascent higher; gold was up $14/oz. or 1% to start the week.
The main stories in Monday’s trading session came as investors continued to fret over the Irish debt crisis amid worries that American banks were not as healthy as they might appear on the surface. These fears were confirmed by a Wall Street Journal report of an FBI raid of three hedge funds in a massive insider-trading investigation which looks likely to hit a variety of names on Wall Street. “It is the brokerage and the investment bankers that are going to be the most likely targets of these investigations,” said Robert Phipps, a director at Per Stirling Capital Management. Despite this gloom, investors shrugged off these worried by mid-afternoon as solid performances out of a variety of technology and retail names helped to bring the market back from its downward spiral.
One of the biggest gainers on the day was the United States Natural Gas Fund (UNG) which rose by 2.5% to start the week. Today’s jump came on continued speculation over cold weather across much of the major gas consuming regions in the Northeast and Midwest regions of the United States. “We are going to see the first real winter weather in this country and it’s enough to get people buying natural gas,” said Carl Neill, an energy consultant at Risk Management Inc. in Atlanta. UNG, which is still down significantly on the year, is beginning to make an end of the year run much to the delight of investors in the beaten down ETN from USCF; it is now up 10.3% over the past week and could continue higher if the cold weather remains for an extended period of time [see more fundamentals of UNG here].
One of the biggest losers in the ETFdb 60 was the Vanguard European ETF (VGK) which sank by 1.5% on the day. This fund tumbled as European markets sold-off thanks to the Irish debt situation and ongoing fears that the bailout will spur other heavily indebted EU members– such as Portugal or Spain– to seek similar deals. Spain’s stock market sank by 2.7% on the day while the Italian stock market fell by 1.9%. “If you see an Ireland package, we would hope that contagion effects would be limited,” said Ian Harnett, managing director at Absolute Strategy Research, a financial consulting firm. “But investors appear to be picking off weak countries one by one,” leaving Portugal “very much at risk.” [see holdings of VGK here].
Disclosure: No positions at time of writing.