U.S. equity markets surged in Thursday trading as investors cheered the successful IPO of GM and progress in the Irish debt crisis. All three of the major American indexes finished the day up roughly 1.5% while commodities also rebounded; oil gained 1.9% and gold surged 1.1%. Meanwhile, Treasury markets continued their slump as yields rose once again on the short and medium sections of the curve with the 10 year note yield trending close to the 2.95% mark before easing back to the 2.9% level to finish out the day.
The main catalyst for today’s upswing came from Ireland, as news broke suggesting that the struggling nation was on the cusp of coming to terms with other EU members and the IMF over a bailout. According to Irish central bank governor Patrick Honohan, a loan package worth tens of billions of euros could be on the way, which would help to stabilize the highly indebted country and calm investor fears over the health of the euro zone. Meanwhile, closer to home, General Motors’ return to the publicly traded world went relatively smoothly as the company raised more than $20 billion in what would become the largest initial public offering in American history. The IPO was priced at $33 per share and the company managed to gain roughly 3% in its first day of trading, marking an incredible turnaround for the once iconic company which just 18 months ago was delisted from the NYSE during its bankruptcy proceedings. While it remains to be seen what the future holds for GM, robust investor interest in the offering definitely helped to give markets a boost in today’s session.
The ETFdb 60 Index, a benchmark measuring the performance of asset classes available through ETFs, jumped 1.2% on the day.
One of the biggest ETF winners on the day was the PowerShares DB Agriculture Fund (DBA), which gained 3.7%. This spike was the result of a weakened dollar, which helped to send commodity prices sharply higher across the board. Among the biggest-gaining components of DBA were sugar, which jumped by 6.4%, as well as corn and coffee, which both gained more than 3.1% as well. Rising prices were not limited to the soft commodities though, as cattle and hogs both gained more than 1.7% as higher costs for animal feed inputs such as corn looks to send meat prices upward in the near future. “We think U.S. corn and soybean supplies will continue tightening, while even currently high prices are not enough to put a serious brake on demand.” Alex Bos at Macquarie Bank Ltd. in London said in a report [see more on DBA's fact sheet].
One of the biggest losers in the ETFdb 60 was the iPath S&P 500 VIX Short-Term Futures ETN (VXX), which tumbled by 5.7% in Thursday trading. Today’s sharp losses came as traders dumped the main way to play the ‘fear index’ after concerns over sovereign default in Ireland waned and investors scooped up the GM IPO. Volume was once again heavy in the popular ETN, reaching 11.5 million shares–far ahead of the average daily volume of 2.8 million. These losses continue the downward spiral for the iPath product, which has now lost 49% over the past quarter and 66.7% year-to-date [see more fundamentals of VXX here].
Disclosure: No positions at time of writing.