Equity markets tumbled to finish May on a down note, as the Dow and S&P 500 sank 1.2% while the Nasdaq slipped 0.9%. This sharp decline helped to send the markets to their worst month in more than a year as worries continued to build over the economic condition in Europe. In commodity markets, gold dipped to start the day but finished ahead by $2/oz., while oil shed roughly 50 cents in Friday trading. The downturn in equity markets can be attributed to more bad news out of Europe after Fitch cut its rating of Spain by one notch. “People are worried about Europe and we’re seeing a knee-jerk reaction, particularly ahead of a long weekend,” said Joe Heider, a principal at Rehmann in Cleveland. He also said that traders won’t want to be holding some investments when U.S. markets are closed Monday, but European exchanges are open for business as usual.
The ETFdb 60 Index, a benchmark measuring the performance of asset classes available through exchange-traded products, dropped 6.92 points, or 0.7%, a fitting end to a dismal week. Volume was once again heavy, exceeding 1.1 billion shares for the fourth time on the week.
One of the biggest winners in the ETFdb 60 was the United States Natural Gas Fund (UNG), which rose by 1.2% to finish the week. This came after some M&A activity in the natural gas sector as Royal Dutch Shell purchased natural gas firm East Resources for $4.7 billion. Peter Voser, chief executive of Shell, called the East Resources assets “the premier shale gas play in the Northeast U.S.” which will help the company produce 16 trillion cubic feet of gas this year. This trend, along with the Gulf oil spill, is causing some investors to believe that super-major oil firms will begin to shift more of their production towards natural gas.
One of the biggest losers in the index was the Financials Select Sector SPDR (XLF), which sank by 2.2% on the day. This sharp decline came after the Spanish debt downgrade, which saw the country’s rating go from AAA to AA+. Many banks were down after the news with Bank of America falling by 2.7% while J.P. Morgan and Citigroup both fell by about 1.1%. This pushed XLF to its worst monthly loss since last February when it nearly 18%.
Disclosure: no positions at time of writing.