After dropping to start the day, U.S. equity markets trended higher for much of Friday’s trading session. The tech heavy Nasdaq rose by 0.3% while the Dow and the more broad S&P 500 both jumped by 0.5% on the final trading day of the week. Oil continued its ascent higher, surging by more than $2.3/bbl. thanks to supply issues in much of the Midwest. Meanwhile, Treasury markets continued their slide as the two year note saw its yield rise by 0.01% and the 10 year note reached the 2.8% mark; a near forty basis point gain in a matter of weeks.
Today’s modest gains came after strength in the energy sector, boosted by firm crude prices and solid gains from the industrial and conglomerate sectors which surged on news of rising imports in China. This huge gain led many investors to believe that domestic demand was rising in the world’s most populous country, potentially providing much needed growth to sagging developed markets. Imports rose 35.2% from a year earlier and crushed market forecasts of a 26.1% gain. Analysts at Goldman Sachs wrote in a note: “We have been highlighting over the past month that there has been a stealth loosening of policy since July, which probably started to show its impact on economic data in August.”
One of the biggest winners in the ETFdb 60 today was the United States Natural Gas Fund (UNG), which jumped higher by 2.4% on the day. The popular commodity ETF was in focus on Friday as a massive gas explosion rocked a neighborhood in Northern California, while supply problems in the Midwest threaten to increase fuel costs for much of the region. Equally important was the recent approval won by natural gas firm Cheniere in order to export liquid natural gas to any country with which the U.S. has a free trade agreement, potentially opening up massive gas supplies to countries such as Canada, Mexico, and Singapore, among many others. This could increase the demand for the fuel and turn it into an export instead of just a domestic fuel source [see more charts of UNG here].
One of the biggest losers in Friday trading was the iPath S&P 500 VIX Short-Term Futures ETN (VXX), which fell by 2.1% to close out the week. Today’s losses came as U.S. equity markets stayed relatively flat throughout much of the day’s trading; the S&P 500 stayed within a seven point range throughout the session. This recent stabilization in equity markets has been absolutely devastating for VXX, which has now fallen 17.3% over the past two weeks and is now down 45.6% on the year [see more on VXX's fundamentals page].
Disclosure: No positions at time of writing.