Equity markets surged higher in Tuesday trading thanks to quality earnings out of the retail sector and a bid by BHP for Potash Corp. of Saskatchewan (POT). All the major indexes were up more than 1% on the day, with the Nasdaq leading on the upside on a 1.3% gain. Commodities also trended higher, while the Treasury market saw some wind come of its sails; the 10 Year Note’s yield surged up to 2.64% from its 52 week lows in Monday trading. Today’s move to riskier assets came as two retail bellwethers, Wal-Mart and Home Depot, both posted solid earnings, alleviating some investor concerns over the health of the consumer heading into the fall quarter. Many also breathed a sigh of relief after seeing the latest PPI numbers from the government, which signaled that the economy may not be on the cusp of falling into a deflationary tailspin. “The data and earnings should ease people’s concerns about a double-dip,” said Peter Bible, a partner at EisnerAmper. “We’re anemic; we’re slow; we’re crawling, but we’re not going backward.”
The ETFdb 60 Index, a benchmark measuring the performance of asset classes available through ETFs, climbed 9.06 points, or 0.9%. Winners outnumbered losers by more than four-to-one, as most equity components rose.
One of the biggest gainers on the day was the Market Vectors Agribusiness ETF (MOO), which surged by 4.9%. This gain came as a result of BHP’s attempted hostile takeover of Potash Corp, the world’s largest potash producer. BHP offered $130/share for POT but the offer was quickly turned down by management, who said that the offer was “grossly inadequate.” While shares of POT surged by more than 24%, this news also helped to push up the prices of other companies in the industry, including Mosaic and CF Industries, which rose by 8% and 6%, respectively. This hope for a wave of M&A activity in the sector looks to be extremely positive for the MOO, and could help to propel shares of the fund higher in future weeks [see Agribusiness ETF Soars On BHP's Potash Play].
One of the biggest losers in the ETFdb 60 was the iPath S&P 500 VIX Short-Term Futures ETN (VXX), which fell by 4% on the day. This came after smooth trading on solid data helped to soothe investor fears over the health of the economy, limiting demand for the portfolio insurance offered by VXX. This ETN traded on light volume several million shares below its daily average, as the fund reversed an upward trend that saw the popular iPath ETN surge more than 11% over the past two weeks. Today’s loss is more in line with the longer term performance of VXX; the fund is now down 33.5% so far in 2010 and down 63.5% over the past 52 weeks [see charts of VXX here].
Disclosure: No positions at time of writing.