A choppy session in equity markets left the major indexes mixed to end the day, after a tame CPI report did little to sway investor sentiment. The Dow fell by 0.1% while the Nasdaq jumped by 0.3% and the S&P 500 barely squeaked by with a gain. Commodity markets finished the day slightly lower across the board as the lowest annual inflation level in 50 years helped to limit demand for the asset class. Gold finished the day down by $3 an ounce while oil slid by close to $2/bbl as demand worried helped to send crude prices lower once again today.
The market moving news today came from the retail sector, which saw quality earnings reports from both Wal-Mart and Home Depot. These figures were further backed up by the quarterly report from Target, which forecast that the fourth quarter same-store sales would be the best in three years for the retail giant. “There is definitely movement on the part of the consumer, who seems to be spending money, going to restaurants and shopping,” said Owen Fitzpatrick, head of U.S. equity group at Deutsche Bank. Meanwhile, the annual inflation rate of 0.6% was the smallest rise on record, helping to back up Fed chair Ben Bernanke’s claim that deflation was a much more immediate concern to the economy than inflation. This helped to ease many investors’ fears over the effects of QE2 and embrace the program for the time being.
The ETFdb 60 Index climbed 2.25 points, or 0.2%, as winners outnumbered losers by more than four-to-one. Trading was moderate on the day, a material decrease from a very active Tuesday session.
One of the biggest ETF winners on the day was the United States Natural Gas Fund (UNG), which surged by 4%. Today’s gains came as spot prices for the fuel rose the most in four months on speculation that tomorrow’s weekly storage report from the EIA will show a smaller gain than normal for this time of year, helping to push the stockpiles below the five year average for the week. The EIA is expected to report an increase of 8 bcf, far below the average for the week of 18 bcf as cold temperatures across the nation led to a surge in demand for the popular heating fuel. “There’s cold temperatures on the rise, and there’s the possibility that they may report a net storage withdrawal tomorrow,” said Teri Viswanath, director of commodities research at Credit Suisse , who estimated that inventories dropped by 5 billion cubic feet [see more on UNG's technicals page].
One of the biggest losers in the ETFdb 60 was the PowerShares DB Commodity Index Fund (DBC), which sank by 0.8% on the day. This broad commodity fund fell today thanks to its high allocations to oil and crude derivatives such as heating oil and light crude, which all had rough trading days. WTI crude fell by 2.3% on the day while heating oil and gas fell by 2.4% and 2.8%, respectively. What was even more interesting about these losses were that they came after the EIA reported a 7.3 million drop in U.S. crude supplies last week, generally a bullish sign for the oil markets. Instead, investors focused in on demand worries in Asia and the ongoing sovereign debt crisis in Ireland which more than canceled out the bullish supply readings. “Fears about Ireland and China are trumping inventories at the moment,” said Andre Julian, chief financial officer and senior market strategist at OpVest Wealth Management in Irvine, California. “Under normal circumstances prices would rally after a 7 million-barrel drop.”
Disclosure: No positions at time of writing.