Equity markets continued their slump in Thursday trading, as all the major indexes fell by roughly 0.6% on the day. Oil also fell as fears over global growth resumed and send the commodity down 2.8% on the day. Surprisingly, T-bills sold off a bit despite the exodus from equities as the 10-year and two-year notes both saw yields rise. Investors seemingly avoided the low yielding government securities for precious metals, which all had a banner day. Gold and platinum both rose by roughly 1.4% while silver gained by a more modest 0.9% as investors embraced the safe havens on worrying reports from Cisco and poor unemployment numbers. The weekly number of people filing for first time unemployment benefits rose by 2,000 to 484,000, disappointing analysts who had predicted a slight decrease. In terms of earnings reports, Cisco disappointed with its revenue and outlook numbers sending shares plunging by almost 10% on the day.
The ETFdb 60 Index, a benchmark measuring the performance of asset classes available through ETFs, inched lower by 1.18 points, or 0.1%. Trading was once again heavy, as no signs of an August slowdown have emerged on Wall Street.
One of the biggest gainers on the day was the Market Vectors Gold Miners ETF (GDX), which surged by 2.5%. This boost came as investors bought up gold, propelling the yellow metal up past the psychologically important $1,200/oz. mark. “What you’re seeing here are two crowds buying in,” said senior analyst Adam Klopfenstein at Lind-Waldock to MarketWatch. “We’re rallying off the flight-to-quality crowd with short-term developments,” while what he called the “long-term buyers” are keying on expectations for inflation down the line. As investors grow increasingly concerned with the low growth levels and anemic yields for sovereign debt, gold looks to remain in focus as the main alternative play to this increasingly weak economic environment [see more charts of GDX here].
One of the biggest losers in the ETFdb 60 was the Technology Select Sector SPDR (XLK), which fell by 1.4% on the day. Today’s steep loss came on the back of Cisco’s bearish report, which helped to drag the entire tech sector sharply lower. Cisco Systems, which makes up 6% of the total assets of XLK, topped analysts expectations excluding one-time items by one cent but its revenues fell $80 million short of the consensus estimate. “People are paranoid,” said Neil Hennessy, president of Hennessy Funds. “Investors are looking at how are you going to grow your top line? They can’t see it in a slow economy.” This slight miss led to an extreme sell-off in the tech sector, sending shares of most hardware and software firms tumbling [see more holdings of XLK here].
Disclosure: No positions at time of writing.