Despite the choppy trading and continued uncertainty in Europe, American stock managed to finish the day higher pretty much across the board. The Dow rose by 0.4% while the broader indexes more than doubled the 30 stock index, as the S&P 500 rose by 0.9% and the Nasdaq gained 1.5% for the day. In commodity markets, most resources finished in the green as well, as gold added about 1.3% and oil surged to just below the $90/bbl. mark on a 1.9% gain. Soft commodities, on the other hand, did see broad weakness on the session as all of the grains slumped, led lower by 3% losses in the corn and wheat markets on hopes for higher supply levels.
In currency markets, the dollar finished slightly lower against most of the major currencies, falling below the 77 yen mark but staying flat against both the euro and the pound. The biggest losses were seen in the Canadian dollar trade as the loonie strengthened by nearly 0.6% in the session against the greenback. These gains were probably due to increases for oil prices, especially given the country’s propensity to send its exports to the U.S. Nonetheless, Treasury markets were pretty much flat, staying at 0.21% for the Two Year and rising to 1.99% for the Ten Year.
One of the biggest ETF winners on the day was the iShares Dow Jones Transportation Average Index Fund (IYT) which surged by 3.5% in the session. Today’s gains were largely thanks to strength in the railroad sector as Kansas City Southern was upgraded to ‘buy’ from ‘hold’ by an analyst at Citi. This news helped to push up shares of the company by over 5% on the day and the good news trickled into a variety of other companies in the sector as well. Norfolk Southern, Union Pacific, and CSX all gained close to 3% on the report, and also saw some added buying on another report which suggested that the impact from Hurricane Irene was minimal on rail traffic in the Northeast. Thanks to these key reports, IYT, which is heavy in exposure to railroads, was a huge winner on the day, beating the market by a large margin in Tuesday trading [see holdings of IYT here].
One of the biggest ETF losers in the session was the PowerShares DB Agriculture Fund (DBA) which slumped by 0.9% in Tuesday trading. These losses came as a report hit the wires of strong rains to parts of the Southern plain states such as Kansas, Oklahoma, and Texas, over the next few days. These storms could help to mitigate the drought conditions that most of the area has been experiencing and boost the prospects of the wheat crop in the process. Thanks to this anticipation of higher supply, wheat prices, along with other major grains such as corn, slumped heavily on the day falling by nearly 3%. Wheat and corn combine to make up nearly 25% of the fund so their weak performance was obviously a huge drag on today’s return. The only thing that saved DBA from a worse return was the strong performances in the livestock and cotton/cocoa trading, as these products all finished in the positives and helped DBA to lose just under one percent for the day [see more on DBA's fact sheet].
Disclosure: No positions at time of writing.