After Tuesday’s sharp correction, equities rebounded across the board in Wednesday’s session as all of the major indexes stormed higher. The Dow led the way on the upside–gaining 1.2%–and was closely trailed by the S&P 500, which jumped by 1.1%, and the Nasdaq, which finished ahead by 0.8%. Commodity markets also recovered nicely from their Tuesday slump as gold rose by $9/oz. and oil regained its level above the $82 a barrel mark.
These gains were largely due to a sharp reversal in the U.S. dollar index, which fell by almost $1 to end the day at $77.23, a decline of close to 1.3% on the day. Quality earnings reports also helped propel the markets higher, as solid numbers from market bellwethers–including profits from three major airlines–boosted investor sentiment. Markets also reacted very positively to news from Boeing which swung to a third quarter profit and raised its full-year outlook. “People are getting confident that earnings are going to be good this year,” said Maris Ogg, president of Tower Bridge Advisors. “Maybe not to the level where we have 75% or 80% of companies beating expectations, but people are more confident the economy is on a more even keel.”
The ETFdb 60 Index, a benchmark measuring the performance of asset classes available through ETFs, rebounded from Tuesday’s freefall to add 10.37 points, or 0.1%. Winners outnumbered losers by nearly nine-to-one, with all equity components rising.
One of the biggest winners on the day was the PowerShares DB Agriculture Fund (DBA), which surged by 2.8%. Today’s gains came after another solid day in the commodity markets, which rebounded quickly from yesterday’s sell-off. Among the top gainers in the agricultural sector were corn, coffee, and soybeans which surged higher by 5%, 3.1%, and 3% respectively. Coffee jumped on continued supply deficit concerns while corn markets surged on rumors that yields would be downgraded again, which could spur farmers to hold on to their crops in anticipation of higher prices. Meanwhile, soybean prices were boosted by news of increased demand from China after the USDA reported a 180,000 metric ton sale to the world’s most populous country [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 Fund (VXX), which fell by 5% on the day. This sharp loss came as the S&P 500 rose modestly throughout the day and only experienced one minor setback in the first hour of trading. This helped to reduce demand for the ETN tracking the fear index. VXX’s volume topped 33 million shares, or roughly 10 million more than the daily average. Today’s sharp losses extend VXX’s terrible 2010; the fund has lost 45% in the past 13 weeks and 68.2% in the last year [see technical analysis of VXX here].
Disclosure: No positions at time of writing.